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| GST Tips |
| You and your home and the new tax — we show you how to get the GiST. |
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We all have heard about the Goods and Services Tax, the GST, but many of us still don't really understand how it works, so Our House spoke to financial expert and host of TV's Money program, Paul Clitheroe to help sort out how the new tax will apply to home buyers, builders and renovators.
From 1 July 2000, a 10% tax will be added to the price of most goods and services, replacing a complicated mish-mash of taxes known collectively as the wholesale sales tax. Currently, some items attract no wholesale sales while on others it can be as high as 45%, so the 10% GST means some prices will rise and some will fall as the tax system is standardised.
Although the GST was intended to be a broad-based consumption tax, applied across the board, political manoeuvrings have resulted in many exemptions. The result is that the new tax is becoming almost as complicated as the old system, but it helps to know what is exempt under the new system.
The introduction of the GST will have a significant effect on Australia's building and construction industry. As the new tax will be imposed on the sale price of new homes, housing and building associations expect a significant rise in the price of new properties compared to sales of existing houses.
Meanwhile, many renovators are scrambling to get work done before the June 30 cutoff, but the effect is that builders are in high demand, and setting their prices accordingly. So as Paul Clitheroe points out, there's no point in paying a 15% premium on your building costs to save paying 10% after June 30.
Paul's advice:
Buying Property:
- There will be no GST on the sale of existing homes. However, many of the costs associated with buying a house, such as agents' fees, will be taxed, and nobody is clear yet on whether the buyer or vendor will end up paying the extra charges.
- No GST is payable on unimproved land, but after June 30, improvements to a block will be taxed, so Paul's advice is, if you have land you're intending to build on and it needs work, for example, clearing, terracing or drainage, get the bobcat in before the end of June to avoid paying that extra 10%.
- Both Paul and the Housing Industry Association expect the cost of a new house or apartment to rise by 5-8% after June 30.
- First home buyers will get a Government rebate of $7000.
Renting:
- Residential rents will not be subject to GST, but any repair or maintenance costs on tenanted properties paid for by the landlord after June 30 will rise by 10%. Landlords will be able to claim all of these costs, including the GST component, as negative gearing deductions in their annual tax returns, but Paul says it's reasonable to assume rents will rise by 2-3% under the new tax regime.
Renovating:
- If you are thinking about buying materials before the GST take effect, do some research. Some materials currently attract wholesale sales tax of between 12 and 22%, so as of July 1st their prices will come down. The accompanying table gives a comprehensive list of building and housing materials, and shows the tax currently payable. One example cited by Paul is that spa baths are now taxed as a luxury item, so they will be cheaper after June 30, but taps and fittings attract no sales tax. So to save money, buy your taps now, but don't buy a spa bath until July.
Household Costs:
- Most telephone call charges will incur the GST as will most service and equipment charges. The GST applies to all local calls, however the Government has decided that the cost of a local call will be capped at 25 cents, while the cost of a local call from a public payphone will be capped at 40 cents. While local calls have been capped at these levels, they do include GST.
- Council, water and sewerage rates and garbage collection fees are all GST exempt.
- Electricity and gas are subject to GST, so those bills will be 10% higher.
- GST applies to all service people, so tradesmen and labour costs will rise by 10%.
Electrical appliances:
- Once the GST legislation was passed, it became apparent that the cost of certain electrical goods, notably TVs VCRs, Stereo gear and video cameras, would become much cheaper once the 32% luxury tax was replaced by a 10% GST. The fear was that people would delay purchasing these items until after the GST, so on 1 July 1999, the government reduced the sales tax on these items to 22% in an effort to keep sales ticking over. However, although these items have come down in price, they will reduce still further after June 30, so Paul's advice is, wait until July before lashing out on new electrical gear.
And for those who are confused abut the GST, Paul's final word: It's not the GST that's a mess, it's our present tax system. Rather than a range of seemingly arbitrary tax rates, the GST imposes a flat 10% on everything, and that's got to be easier to understand.
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Cost
Under the new tax system, the Wholesale Sales Tax (WST) will be abolished and replaced by a GST on July 1, 2000. Materials used in bulding work currently attract a range of WST rates, varying from 22 per cent down to 0 per cent. As a result, some materials will drop in price, others will rise. The HIA has assembled a list of building-related products and their current rates of WST. The following table shows how their prices can be expected to change after the GST.
| Material |
WST now |
GST July
| Net effect |
| Architraves |
0% |
10% |
$ rise |
| Basins |
12% |
10% |
$ fall |
| Bathroom cabinets |
0% |
10% |
$ rise |
| Baths |
0% |
10% |
$ fall |
| Batten screws and silicon |
0% |
10% |
$ rise |
| Battens |
0% |
10% |
$ rise |
| Bricks |
0% |
10% |
$ rise |
| Carpet |
12% |
10% |
$ fall |
| Cement incl. mortar |
0% |
10% |
$ rise |
| Concrete slab |
0% |
10% |
$ rise |
| Cornices |
0% |
10% |
$ rise |
| Door hardware (handles, locks, etc) |
0% |
10% |
$ rise |
| Doors |
0% |
10% |
$ rise |
| Downpipes |
0% |
10% |
$ rise |
| Electrical wiring |
0% |
10% |
$ rise |
| External drainage |
0% |
10% |
$ rise |
| External hose cocks |
0% |
10% |
$ rise |
| Flashings |
0% |
10% |
$ rise |
| Footings |
0% |
10% |
$ rise |
| Garage Doors |
0% |
10% |
$ rise |
| General hardware (nails, bolts, etc) |
0% |
10% |
$ rise |
| Heaters |
12% |
10% |
$ fall |
| Hotplates |
12% |
10% |
$ fall |
| Hotwater services |
12% |
10% |
$ fall |
| Insulation |
0% |
10% |
$ rise |
| Internal drainage |
0% |
10% |
$ rise |
| Internal lining angles |
0% |
10% |
$ rise |
| Internal tapware |
0% |
10% |
$ rise |
| Kitchen cabinets, cupboards, storage units |
0% |
10% |
$ rise |
| Light battens |
0% |
10% |
$ rise |
| Light fittings |
12% |
10% |
$ fall |
| Metal fascia and gutters |
0% |
10% |
$ rise |
| Metal roofing |
0% |
10% |
$ rise |
| Mirrors |
12% |
10% |
$ fall |
| Ovens |
12% |
10% |
$ fall |
| Paint |
0% |
10% |
$ rise |
| Paving & driveways |
0% |
10% |
$ rise |
| Power points |
0% |
10% |
$ rise |
| Pre-assembled frames & trusses |
0% |
10% |
$ rise |
| Putty |
0% |
10% |
$ rise |
| Rangehoods |
12% |
10% |
$ fall |
| Roof tiles |
0% |
10% |
$ rise |
| Sarking |
0% |
10% |
$ rise |
| Scaffolding |
22% |
10% |
$ fall |
| Sheeting |
0% |
10% |
$ rise |
| Shelving (on-site construction) |
0% |
10% |
$ rise |
| Shelving (pre-made) |
0% |
10% |
$ rise |
| Shower flashing |
0% |
10% |
$ rise |
| Shower screens |
12% |
10% |
$ fall |
| Sink |
12% |
10% |
$ fall |
| Skirting boards |
0% |
10% |
$ rise |
| Skylights |
0% |
10% |
$ rise |
| Spa baths |
22% |
10% |
$ fall |
| Staircases |
0% |
10% |
$ rise |
| Taps |
0% |
10% |
$ rise |
| Tiles — floor (cork, linoleum, rubber, vinyl) |
12% |
10% |
$ fall |
| Tiles — floor (other) |
12% |
10% |
$ fall |
| Tiles — wall (cork, linoleum, rubber, vinyl) |
22% |
10% |
$ fall |
| Tiles — wall (decorative) |
22% |
10% |
$ fall |
| Tiles — wall (other) |
0% |
10% |
$ rise |
| Timber floor coverings |
0% |
10% |
$ rise |
| Timber wardrobes (free-standing) |
0% |
10% |
$ rise |
| Timber wardrobes (on-site construction) |
0% |
10% |
$ rise |
| Timber wardrobes (pre-fabricated) |
0% |
10% |
$ rise |
| Toilet suites |
12% |
10% |
$ fall |
| Towel rails |
12% |
10% |
$ fall |
| Wallpaper |
0% |
10% |
$ rise |
| Water proofing adhesives |
0% |
10% |
$ rise |
| Windows |
0% |
10% |
$ rise |
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More Info
Further information is available through the Australian Taxation Office.
Visit their website at: www.taxreform.ato.gov.au.
You can also phone their Tax Reform Hotline on 13 24 78.
Thanks to Jandson Homes, "New Homeworld", Winsor Rd. Kellyville NSW 2155
Ph: (02) 9629 5680
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Disclaimer
All Fact Sheets and other material on the Our House website are provided as a general information service only and should not be relied upon as a substitute for the advice of a properly qualified tradesman. Neither ninemsn nor its licensors (including the Nine Network) assume or accept any responsibility for, and will not be liable for the accuracy or appropriate application of any information whatsoever in any Fact Sheet or other material on the Our House web site. Your use of the Our House web site is governed by this disclaimer and the ninemsn's Terms of Use.
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