The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Peter Costello

Peter Costello

Treasurer

11 March 1996 - 3 December 2007

Media Release of 19/06/2000

NO.053

BOARDING HOUSES AND THE GST

The figures quoted tonight regarding the impact of the GST on boarding house rents were incorrect.

The final report by Econtech showed only minimal difference between the concessional GST treatment of boarding house rents and input taxing such rents in the short-term.

In the long-term the study found that boarding house rents subject to concessional GST treatment were substantially lower than those input taxed.

It should be noted this is not Government modelling, but independent modelling by Econtech.

Econtechs results were as follows:

Estimated percentage increase in rents

Short-term Long-term

Boarding Houses 4.0 1.5

Concessional GST

Boarding Houses 3.6 3.1

Input taxed

 

The short-term results are broadly similar, particularly given they are only indicative estimates.

In addition, the long-term savings may flow through sooner than assumed by Econtech. A new entrant to the boarding house market or an existing supplier providing services with new buildings or furnishings after tax reform would be able to operate at a lower cost. This competitive pressure would lower all rents.

Increases in rents will be more than compensated through both increased pensions and higher rent assistance.

19 June 2000

Media contact: David Alexander (02) 6277 6390