Senator CHRIS EVANS —My question is directed to Senator Kemp, the Assistant Treasurer. Minister, will public housing rents be input taxed in the same manner that private residential rents will be input taxed? Will state governments receive a GST exemp tion from building inputs that are used to provide public housing? If not, how will state governments recover the extra capital costs of public housing due to the GST? Will they be required to increase public housing rents and increase public housing subsidies, or will they have to cut services?

Senator KEMP (Assistant Treasurer) —As far as I am aware, discussions are occurring with state governments on the issue of public housing. If those matters have been resolved, I will come back and inform the Senate as to current arrangements. In relation to input taxing, governments can get input tax credits. One of the big pluses of this tax reform package is the big advantage that it provides to governments in this area. If there is a specific arrangement relating to public housing, I will also deal with that in my response.

Senator CHRIS EVANS —Madam President, I ask a supplementary question. I appreciate the minister is going to find out how the new taxation regime will work in relation to public housing but, given that many states automatically increase public housing rents in conjunction with CPI increases in social security payments, how will the federal government ensure that public housing rents will not increase as a result of the government's inflationary GST?

Senator KEMP (Assistant Treasurer) —As I said, as far as I am aware that is one of the issues which have been raised with state governments. The government is anxious, as we have made clear, that people who are entitled get the compensation packages which we have introduced. Senator, I will see whether I can provide you with some specific information on that matter.