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Tuesday, 2 October 1984
Page: 1068

(Question No. 1042)


Senator Jones asked the Minister representing the Treasurer, upon notice, on 21 August 1984:

(1) What would be the estimated cost to the Government of granting exemption from the payment of sales tax to pensioners and other social security beneficiaries.

(2) Will the Government consider exempting social security beneficiaries from the payment of sales tax across the board; if not, will the Government consider drawing up a range of goods essential to the welfare and comfort of social security recipients and grant them exemption from sales tax on those goods similar to the existing exemption from sales tax currently granted to all Government departments, large and small businesses and self-employed people.


Senator Walsh —The Treasurer has provided the following answer to the honourable senator's question:

(1) The estimated cost to the Government of granting exemption from the payment of sales tax to pensioners and other social security beneficiaries is indeterminate but substantial.

(2) At the outset it should be noted that it is not correct to say that businessmen or self-employed persons can obtain 'essential' items free of sales tax. What the sales tax law does is to provide exemption for manufacturers to obtain their raw materials, aids to manufacture and similar goods free of sales tax. The purpose here is to prevent double taxation of goods or indirect taxing of exempt goods.

As to the appropriateness of exempting pensioners and other social security beneficiaries ('beneficiaries') from the payment of sales tax, you will appreciate that it is desirable that the taxation system be fair and efficient and complement the Government's general economic policies as much as possible. In this regard, a concession like that proposed by the honourable senator would be inequitable as it would not be well targeted to those who are in greatest need and, in fact, would tend to direct assistance inversely in relation to need . A sales tax concession provides a benefit only in respect of the purchase of taxable goods.

The so-called essentials of life, such as food, clothing, drugs, medicines and shelter, are generally exempt from sales tax so that the concession would not directly enhance the capacity of the needy to purchase goods of this kind. In addition, the greatest benefit would go to those persons who can afford the largest purchases of taxable goods. It would not assist those persons whose means limited them to second-hand goods or precluded the purchase of taxable goods. There would also be problems in policing such a concession. For example, it would be an onerous-if not impossible-task to design effective safeguards to prevent abuse of the concession by eligible persons buying goods for or on behalf of relatives and friends.

Further, as a matter of broad principle, the Government considers that it is more appropriate that assistance to the needy be provided through the social welfare system where it can be directed more precisely to those in greatest need . In this regard, the Government announced in the 1984-85 Budget that further assistance was to be provided for 'beneficiaries'. This further assistance included a discretionary increase, from the first payment in November 1984, in the rate of indexed pensions and benefits, including the unemployment benefit, of $2.50 per week for single people and of $4.20 per week for couples; substantial extra help to pensioners who rent and to those with children; an increase in supplementary rental assistance of 50 per cent to $15 a week; an increase in additional pensions and benefits of $2 to $14 a week per child; and an increase in the mother's and guardian's allowance of $2 to $10 a week.

In view of the foregoing, it is not considered appropriate to introduce the system proposed by the honourable senator.