What is GST?

Before we start:

  • Remember this percentage: 10 percent
  • GST = goods and services tax.

So, what is GST? 
GST is a tax that is paid by consumers (customers) on most goods and services. The tax is then passed on to the Federal Government by the business. For example, let’s say you purchased an iPhone in Australia from the Apple Store, 10 percent of the price of that iPhone is actually GST. The iPhone’s price is already inclusive of the 10 percent tax, and you can usually see the breakdown of the amount of GST you have paid on the receipt. Apple then passes on the GST to the Government. 

Once the GST is collected by the Federal Government, the funds are then distributed back to the states and territories. It’s not equally distributed, but rather adjusted to reflect demographic and economic differences.

It is estimated that 160 countries have adopted GST or a similar tax — but the percentage of tax varies depending on the country. For the purposes of this explainer, we will be looking at Australia’s GST. 

There are some items that are exempt from GST. Basic items and necessities are not subject to GST — governments typically want to make these goods as cheap as possible. Some of those goods and services include:  

  • Most basic food
  • Some education courses, course materials and related excursions or field trips
  • Some medical, health and care services, medical aids, and appliances
  • Some menstrual products  
  • Some medicines
  • Some childcare services
  • Some religious services and charitable activities
  • Water, sewerage and drainage  

How did it come about?
GST has been a divisive political topic over the years. The Coalition floated the idea of GST in 1991 and used it as a core part of their election campaign in 1993. Coalition leader at the time Dr John Hewson famously struggled in an interview to explain how the GST would work (it’s called the Birthday Cake Interview; you can watch it here). That interview was actually considered a factor in the Coalition losing the 1993 election. Here is a breakdown of how GST came to be.

John Howard then became leader of the Liberal Party in 1995 and said he would “never, ever” introduce GST. However, after becoming Prime Minister in 1996, Howard proposed the idea of GST, ultimately passing the tax reforms after negotiating a number of amendments and changes. 

Why do some people talk about 15 percent? 
There have been calls over the years for the percentage of GST to be increased to up to 15 percent in Australia. Discussions about GST work their way into wider discourse about wealth inequality, social security and how tax collected by the government is used. There have been suggestions to use the additional money from the higher GST to go towards supporting lower income households, and additional funding for health and education. The 15 percent proposal, however, has also been met with criticisms. The Australian Council of Social Service has previously said that increasing GST would disproportionately impact lower income earners, and could cost up to 7 percent of one’s disposable income.

Latest Stories





Enjoying our content? Subscribe to continue reading

    Give us a news tip

    Partner with us

    Work with us

    Contact Sales