INTHEBLACK November 2025 - Magazine - Page 26
F E AT U R E
“Australia’s tax base is being eroded by a declining share of
consumption taxed under GST coupled with a fall in revenue
from other consumption taxes like tobacco excise and fuel.
This highlights the urgent need for alternative, resilient
revenue streams, with the GST a primary candidate.”
JENNY WONG, CPA AUSTRALIA
This includes the tax-free status of some
goods and services but not others (a remnant
of the previous sales tax system), and the
inconsistent treatment of beverages, food
and health products. The question is whether
it is time to reassess these exemptions.
“Effort was made to design the GST
to achieve fair and equitable outcomes
for both businesses and consumers,”
says Ken Fehily, partner and director
of GST specialists firm Fehily Advisory.
“But they’re no longer working as effectively
as intended. A major overhaul is well overdue
and needed.”
Reforms to GST on social housing
and supported housing, and the Australian
Taxation Office’s (ATO) differing treatment
of build-to-rent developments at scale,
also need to be addressed. These complexities
create barriers for developers and consumers.
“A comprehensive review of how GST
applies to residential housing is essential
to ensure it supports access to affordable
housing,” says Fehily.
The administration of the GST is another
area requiring attention. The system is
governed by a multitude of complex statutes,
including the Taxation Administration Act
1953, A New Tax (Goods and Services Tax)
Act 1999 and many associated regulations
that make compliance daunting.
“The ATO has frequently been surprised
by unfavourable judicial outcomes regarding
its decisions on GST interpretation and
administration. Likewise, wins for the ATO
have often caused significant unexpected
problems for businesses. We need faster and
clearer guidelines, a more straightforward
approach and legislative fixes,” Fehily says.
INTERNATIONAL COMPARISON
A glance at the way other countries apply
their consumption taxes shows there is plenty
of scope for Australia’s rates to increase,
with the GST’s contribution to overall tax
revenue in Australia relatively low compared
26 INTHEBLACK November 2025
to international standards. The latest figures
released by the Organisation for Economic
Co-operation and Development (OECD)
show value-added taxes accounted for
11.5 per cent of Australia’s total taxation in
2022, the lowest in the OECD [see breakout].
Globally, the trend has been for standard
broad-based consumption taxes to rise,
while specific taxes on consumption like
tariffs have generally decreased.
“Australia’s 10 per cent GST rate is
the lowest among OECD countries that
have a consumption tax, contributing
a significantly smaller share to tax revenue
compared to the OECD average,” Wong
says. “Many comparable nations are already
relying more heavily on consumption taxes.”
Countries like the US that lack a national
consumption tax tend to compensate with
tariffs. “These are considered to be a less
efficient way of collecting revenue from
consumers,” Wong adds.
CLEAR DIRECTION NEEDED
Experts say it is essential to consider raising
the GST rate or broadening the base
of goods and/or the services to which
it applies. While this may be politically
contentious, it could lead to personal income
or corporate tax rate cuts, creating a more
equitable tax landscape. Any increase would
need to be handled carefully.
“In the current cost-of-living environment,
if the government went down the path
of raising the GST rate or if the base
is broadened, it could be quite politically
sensitive,” says KPMG Australia tax policy
lead, Alia Lum. “Compensation for
lower-income households will be an
important part of the package.”
The federal government would wear
the political cost of any rise in the GST.
“I don’t think any federal government
is going to see that as a good idea, “says
economist Saul Eslake. “A prerequisite
for any reform to the GST would have
