Australia's complex web of GST exemptions is causing households which spend similar amounts each year to pay significantly different rates of tax, new research by the e61-UNSW Policy Research Partnership has shown.
The study of the latest Household Expenditure Survey shows that among households spending about $38,000 a year, GST paid ranges from roughly $2,100 to $3,400 — meaning some pay around 37% more GST than others, despite spending the same overall amount.
The variation is caused by Australia exempting so many items from the GST, such as certain types of food, health care and education fees. This means the amount of tax a household pays is highly influenced by the types of goods and services it buys.
"In Australia only around half of items attract GST. Our research finds these exemptions are causing a significant inequity where households which spend or earn similar amounts overall end up paying hugely different amounts of tax," said e61 Research Manager Dr Matt Nolan.
"For households with low-spending or income, the main cause of the divergence is the type of food they buy while for high-spending and high-income households, exemptions for education and child care play a larger role."
Spending percentile |
Average annual spend |
GST paid range |
Percentage difference |
10th |
$15,222.18 |
$729.36 - $1,354.77 |
46% |
50th |
$37,532.71 |
$2,096.72 - $3,363.89 |
37% |
90th |
$87,264.86 |
$5,194.41 - $7,732.24 |
33% |
The research from the e61-UNSW Policy Research Partnership found this inequity could be overcome by removing all GST exemptions while transferring the extra revenue back to all adults in the form of an annual rebate.
"In this scenario, people who earn and spend less are made better-off, while those who are higher earners and spenders end up contributing additional tax," said e61 Researcher Josh Clyne.
"This is just one example of how GST could be redesigned so it no longer depends on what people buy. The exact form of compensation is up for debate, but it's clear we can reduce these horizontal inequities without punishing the most vulnerable."
The research was based on the latest Household Expenditure Survey, a nationally representative survey covering approximately 10,000 households and their spending across 600 product categories.
