Goods and services tax (Australia)

Before the 1998 election, Howard proposed GST that would replace all existing sales taxes, as well as applying to all goods and services.

Nevertheless, the incumbent government retained a majority of seats in the lower house and Howard described the election win as a "mandate for GST".

In 1999, an agreement was reached with the state and territory governments that their various duties, levies and taxes on consumption would be removed over time, with the consequent budget shortfall being replaced by GST income distributed by the Commonwealth Grants Commission.

During the 1998 election campaign, the leader of the Australian Democrats, Meg Lees, stated that her party was opposed to GST unless food, books and tourism packages sold offshore were exempt, and other compensating tax measures were implemented.

However a compromise was eventually reached with Lees, involving most basic food items being exempt from GST, the GST on library purchases of books being refunded, a temporary 8% refund on school textbooks, increases to welfare payments, and greater powers to the Australian Competition & Consumer Commission to oversee the implementation of the new tax regime.

Some goods and services (notably salaries, wages, fresh food, and real estate) are exempt from GST.

Certain types of supplies are free of GST, examples include fresh unprocessed food, medical services, education courses, childcare, exports, pre-owned real estate and going concerns.

John Howard had said that "GST would never become part of Liberal Party policy",[15] but his change of heart would become apparent in the lead-up to the 1998 campaign.

[16] The move triggered infighting amongst the Democrats, and while the Democrats performed reasonably well in the 2001 federal election when Stott Despoja was party leader, the infighting worsened, resulting in Stott Despoja being forced out of the leadership and the loss, at the 2004 federal election, of the balance of power they once held in the Senate.

The annihilation of the Democrats was completed at the following election in 2007 when they lost all their remaining seats, with the Australian Greens becoming the major third party.

Labor attempted to reprise the effects of the birthday cake interview by deriding the application of GST to cooked and uncooked chickens, but failed to ignite public response to the limited scope of the rollbacks[17] applying only to gas and electricity bills.

Labor lost the election, and though the September 11 attacks and the so-called Tampa affair dominated the campaign, the loss would effectively end all serious opposition to GST.

The federal government counteracted with its own advertising campaign which claimed that New South Wales had breached its contractual obligations under the 1999 GST Agreement by continuing to charge unfair stamp duties and land taxes, which were supposed to have been abolished.

[28] The real estate market returned to boom between 2002 and 2004 where property prices and demand increased dramatically, particularly in Sydney and Melbourne.

[citation needed] Before the introduction of the GST, goods could be purchased from suppliers offering duty-free pricing upon presentation of a current passport and airline tickets.

This does not extend to consumable goods such as food and beverages, or any services such as plane tickets or hotel room charges.