New Australia Institute research shows that if the GST had kept up with economic growth, as it was intended to do, states and territories would have received an additional $231 billion in revenue in the time since it was introduced.
That includes $22 billion in lost revenue in 2023-24 alone.
The decline of GST revenue has been driven by inequality. This is because wages haven't kept up with the cost of housing, which means lower-income earners have less money to spend on other things that GST is applied to, and wealthier people are able to avoid GST on things they are more likely to use, like private health insurance and private school fees.
Key findings:
- GST was meant to be a stable source of funding for the states, but it has not kept up with economic growth, leaving less money for state governments to provide services like schools and hospitals.
- If the GST had kept up with economic growth, last year Queensland, South Australia and Northern Territory would have had budget surpluses (full statistics in the table below).
- Broadening the GST to include private school fees and private health insurance would generate an additional $1.8 billion per year, overwhelmingly from high-income households.
- Tax concessions cost tens of billions each year; just the Fuel Tax Credit Scheme costs about $11 billion per year.
"The GST was meant to be a secure source of funding for the jurisdictions to pay for things like schools and hospitals, but it has failed to live up to this goal," said Richard Denniss, Executive Director at The Australia Institute.
"If GST had kept up with economic growth, as it was meant to do, the Northern Territory, Queensland and South Australia could have had budget surpluses. Meanwhile, other jurisdictions would be in a much healthier position.
"Inequality has meant Australia collects less GST. This is because higher-income households don't have to pay GST on private schools and private health and can find other ways of avoiding the tax.
"On the other hand, lower-income households are spending more on rent and mortgages, which means they have less money to spend on the things that would generate GST revenue.
"If the Australian Government wants to fill this tax-blackhole without hurting low-income households, it could broaden the GST so that it applies to private school fees and private health insurance.
"Alternatively, it could close tax giveaways like the Fuel Tax Credits Scheme, or raise new taxes on wealth, or the gas industry."
