How an increase in GST will affect the property market

In July, State and Federal leaders met to discuss funding and Tax reform. High on the agenda was raising the GST rate, particularly as States are facing massive funding shortfalls for Education and Health over the coming years. There has been support among State leaders for various changes.
Michael Baird is said to favour a rise from the now 10% to 15% with the funds going to Health and lower households effected, two Labor Premiers are against a rise and are looking for an increase in Medicare levies. Others are looking for a slight adjustment from 10 to 12.5%.

Whatever the case, it seems fairly obvious that at some point the GST rate will be increased

Generally speaking the GST is seen as a regressive tax which basically means that people on a lower income are impacted more.
The higher income person pays more tax but it is in a lower proportion of their total income and of course Fresh Food, Education and Health Care are exempt from GST, so the question on all property investor’s lips should be, ‘How will an increase in GST impact on the property market?’

Firstly a positive, is that by increasing the GST to raise the necessary revenue it takes the focus away from raising revenue in other areas especially the easy pickings in Federal and State taxes associated with land and property, such as abolishing negative gearing, land taxes, and stamp duties. A new nstitute paper finds that a modest property levy of just $2 for every $1000 of unimproved land value would raise $7 billion a year for the states and territories. The annual charge on the median-priced home in Sydney would be $772, in Melbourne $560, and lower in other cities and regions. A broad-based property levy could help plug the gap for schools and hospitals left by the Commonwealth’s decision to cut funding to these areas from 2017-18.Based on historical price trends over the past two decades, revenues from a levy on unimproved land values could double to as much as $14 billion by 2024-25, offsetting much of the projected shortfall from Commonwealth cuts.