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The Budget Elephant in the Room...GST

Posted by Medical Financial Group on 19 May 2014

The front page of The Australian newspaper for Monday 19 May included a small picture of an elephant made out the words GST. The GST being the budget elephant in the room.

The federal budget handed down last week has received a negative response from a number of sectors of the community, and understandably so. Less money available for everyone and more taxes that the new government promised before the election would not happen. To put this in historical context, this is a first term government handing down their first budget, which is their first real opportunity to bring in major changes to how the country is run.

However one salient aspect of the budget is the reduction of funding to the states for health and education sectors. The state premiers have already met to discuss how to respond, less than a week after the handing down of the budget. Their unanimous position is that this is not on – they can’t afford to provide the same level of services in these sectors with the level of federal funding being proposed.

The next step in this process to play out is to argue for an increase to GST. From the federal government’s perspective, better that the state premiers try to sell a GST increase to the public if its the states that need more funding. A smart political tactic if they mange to pull this off.

If an increase in GST is going to be considered, the complex provisions related to GST exempt items will also be looked at. At present doctors don’t charge GST on the provision of therapeutic medical services to patients, due to a specific exemption in the GST legislation. But if all sectors of the community are going to do the ‘hard lifting’, GST on medical services would spread this across the wider community.

Any application of GST to therapeutic medical services will undoubtedly have some impact on the general public’s appetite to spend money on medical services. If it costs more to obtain medical treatment, this will reduce demand. It appears GPs will already be charging a new fee on behalf of the government from July 2015, but any further costs in the form of GST will have a more wide ranging impact on the medical profession.

For now the budget is yet to pass through a hostile senate, so it remains to be seen if the elephant in the room becomes an issue.

Author: Medical Financial Group
Tags: News Tax Budget GST

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