Government Policy

Activities that are GST-free	
	
Health and medical care
The health sector in Australia has significant government involvement through direct subsidy and regulation. Many health services are provided to patients free of any direct charge or by means of a co‑payment that is a fraction of the total cost of providing the service. 
Applying taxes to health care would place the private health sector, with its heavier reliance on direct fees, at a competitive disadvantage with the public health system.
For this reason, most medical and hospital care services and health insurance will be GST-free. The cost of providing health care and insurance will fall as a result of the Government's indirect tax reforms as input taxes will be systematically removed from the sector.
Medical services
Medical services will be GST-free if they attract a Medicare benefit or are commonly used health services, listed by the Government.  Examples of  GST-free health services are:
Health services covered by Medicare:
•	general practitioner and specialist consultations; and
•	diagnostic, surgical and therapeutic procedures (for example, ophthalmology, neurology, optometry, radiation oncology, anaesthetics, radiology, ultrasound etc) and pathology.
Other medical services that will be GST‑free include:
•	hospital charges (accommodation etc);
•	dental services;
•	optical;
•	physiotherapy, chiropractic;
•	speech therapy;
•	occupational therapy;	•	counselling services;
•	home nursing;
•	dietary services; and
•	podiatry.
The precise scope of qualifying medical services is a matter on which the Government will take a final decision following advice from the Tax Consultative Committee.
Hospitals and nursing homes
Health care provided at hospitals, nursing homes, hostels and similar establishments will be GST-free, as will nursing care services supplied to patients at home. The concession will extend to accommodation, drugs, dressings and meals supplied to patients or nursing home residents in the course of their treatment or care. Supplies of items not related to health care, such as food served in hospital cafeterias, or televisions rented to patients, will be taxable in the normal manner.
Medical appliances and aids
The supply of medical appliances for use by people with severe medical conditions or disabilities (examples include wheel chairs, crutches, artificial limbs and modifications to motor vehicles for the disabled) will be GST-free.
The precise scope of qualifying medical appliances is a matter on which the Government will take a final decision following advice from the Tax Consultative Committee.
Drugs and medicines
Drugs and medicines that can only be provided on prescription and PBS and RPBS medicines provided on prescription will be GST-free.  The Government will take a final decision on the precise scope of qualifying drugs and medicines following advice from the Tax Consultative Committee.	
continued . . .	
. . . continued
Activities that are GST-free	
	
Education
Like health and medical care, education receives significant government assistance. Public primary and secondary education is provided free of charge and significant assistance is given to private schools and tertiary and vocational education. Applying the GST to education would discriminate against private providers.
Most educational services will therefore be GST-free. This treatment will apply to:
•	tuition at or through a pre‑school, primary or secondary school;
•	tuition provided at a college, TAFE, university or other recognised institution that leads to a degree, diploma, certificate or other similar qualification; and
•	the provision of accommodation at boarding schools.
The precise range of recognised institutions and courses that qualify as GST-free will be finalised following advice from the Tax Consultative Committee.
Some related goods and services
will be taxable
All mainstream education will be GST‑free. However, additional activities that would normally be taxed will not become GST‑free simply because a school acts as a purchasing agent. Goods (such as computers and books) and services sold or leased to students by any educational institution will be taxable in the normal way. However, goods loaned to students free of charge will not be taxed.
Activities that are not GST-free include:
•	the food component of boarding fees, and food and beverages sold to students (eg in tuck-shops);
•	school bus services and uniforms;
	•	fees charged for equipment hire (eg musical instruments); and
•	sales of goods and services for fundraising purposes.
Courses that do not lead to a recognised degree, diploma, or certificate, such as business training (for example, team development, writing skills etc) will be taxable. However, most businesses will be able to claim input tax credits for tax on course charges.
Childcare
Because childcare often includes an educational component, childcare provided at a recognised facility will be GST-free. As a result, childcare provided at facilities that receive government funding, or where the parents qualify for a government childcare payment, will be GST-free. This will apply to such things as long day care, short care (before and after school), family day care, occasional care and childcare facilities at fitness clubs and registered clubs.
Other forms of childcare, such as that provided by baby sitters, play centres, holiday camps, sporting and craft programmes will be taxable. However, many of these providers will be below the small business threshold ($50,000 for businesses and $100,000 per year for a non-profit organisation) and will not be required to charge GST.
	
continued . . .	
. . . continued
Activities that are GST-free	
	
Charitable activities
Charities, public benevolent institutions, community groups and religious organisations operate differently from businesses. They often do not charge for the goods and services they supply, or impose only a nominal charge. Much of their funding and inputs are provided as donations. 
Their charitable activities will be GST‑free. Non-commercial supplies of goods or services by them will also be GST‑free. 
To avoid unfair competition with business, the commercial activities of these bodies will be taxable. Memberships of registered organisations (for example, local sporting clubs) will be taxable, but donations (which are not payments in return for services) will not be taxable.
In practice many community organisations will be below the $100,000 registration threshold and their memberships will not be taxed.	Religious services
Religious services will be GST-free. Churches and other institutions that supply religious services will not charge tax on those services and will be able to claim input tax credits for tax paid on their inputs. 
Religious items for use in private devotion will be taxable. The precise range of religious services that will qualify as GST-free will be finalised following a report from the Tax Consultative Committee.

	
GST transitional arrangements	
	
To ensure a smooth transition from the wholesale sales tax to the GST, certain transitional arrangements will apply.
Credit for wholesale sales tax on tax-paid stock
When the GST is introduced, many businesses will be holding inventories of new goods for sale on which wholesale sales tax will have been paid. To prevent double taxation, businesses may claim a credit of the wholesale sales tax paid on stock against their GST liability.
Harmonising wholesale sales tax rates
After the GST is introduced, many goods will fall in price. In particular, so called ‘luxury’ goods taxable at the 32 per cent wholesale sales tax rate (for example stereos and televisions), are likely to fall in price.
To avoid consumers holding off on purchases, the Government will reduce the 32 per cent wholesale sales tax rate (other than that applying to furs and jewellery) to the standard 22 per cent rate immediately following the passage of the GST legislation.
Phase in of input tax credits
for motor vehicles
The introduction of the GST will significantly reduce the cost of business by providing input tax credits. This causes a transitional problem as businesses that currently bear wholesale sales tax may delay some of their purchases so that they can get input tax credits.	The Government is concerned that this may disrupt the motor vehicle market. 
To alleviate this problem the Government will phase in input tax credits for motor vehicles over a two year period. In the first year of operation no input credits will be allowed for motor vehicle purchases. In the second year, half the value of the full input tax credit will be allowed. Full input tax credits will be available in the third year and the system will be fully operational.
Bodies that can currently purchase motor vehicles exempt from wholesale sales tax will not be affected by this measure. These bodies would have no incentive to delay purchases and so they will be able to claim full input tax credits from the date of implementation.
The Government will take a final decision on these matters following advice from the Tax Consultative Committee.
Contracts that span the implementation date
Some contracts and agreements will span the date of implementation of the GST. Where this occurs, the general principle will be that GST applies to all goods delivered and all services performed after the implementation date.