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Tuesday, 22 May 2001
Page: 26731

Mr Ripoll asked the Treasurer, upon notice, on 27 November 2000:

(1) Has his attention been drawn to the financial hardship individuals have faced since the Howard Government's failure to introduce a moratorium on GST on building materials and associated costs on building contracts existing prior to 1 July, but not completed before that date.

(2) Were delays in completing the building contracts prior to 1 July a direct result of the introduction of the GST and the rush by individuals to finish or commence building prior to extra charges being incurred after 1 July.

(3) Is the $7000 GST rebate offered to first home buyers, designed to offset the cost of GST, being almost entirely used for the purchase of pre-owned homes that do not attract the GST, thereby negating the intended effect of the rebate.

(4) What is the total sum of revenue obtained by the Government through GST on building contracts that were in existence before 1 July.

(5) Has his attention been drawn to claims of job losses through the slowdown in the building industry; if so, what action will he take to ensure that the building industry does not collapse.

(6) Is the introduction of the GST on existing building contracts prior to 1 July in line with the Government's promise that no-one will be worse off under the GST; if so, why have extra costs as high as $20 000 been incurred by individuals.

(7) What action will he take to ensure that (a) individuals are compensated for losses incurred due to the introduction of the GST in relation to building contracts, (b) a moratorium is put in place to ensure that building contracts can be completed without further penalty, (c) the building industry does not suffer any further losses and job cuts as a result of the introduction of the GST and (d) individuals are compensated for the extra costs incurred in building contracts as a result of the introduction of the GST.

Mr Costello (Treasurer) —The answer to the honourable member's questions is as follows:

(1) I am aware of building contracts where builders promised completion by 1 July 2000 which were not completed by that date.

(2) Delays in building construction may have resulted from a wide range of factors, including poor weather, the building industry's own publicity regarding the impact of the GST, and some builders taking on more work than they could handle.

(3) I am advised that the States and Territories have indicated that the proportion of first home buyers purchasing new homes is in line with previous experience. Any reports of the effect of the FHOS on first home buyer activity should be treated with caution because of the short duration since the introduction of the FHOS.

(4) This information is not available.

(5) To assist the building industry, the Government has doubled the original $7000 First Home Owners Scheme grant to $14,000 for first home owners who enter into contracts between 9 March 2001 and 31 December 2001 inclusive to build or purchase new but previously unoccupied homes. This measure, together with recent reductions in interest rates, will stimulate the building sector, including many small businesses, which of course will have flow on benefits to other parts of the economy.

(6) Yes it is consistent; income tax cuts more than compensate for these increases when considered in a longer time frame. Further, under the GST transitional arrangements, GST only applies to the value of work done from 1 July 2000 onwards.

(7) The Government has already provided concessional treatment to the construction industry, including construction of residential housing, in the GST transition. The transition rules contain special provisions for construction projects which ensure that they are taxed only on the value of work done after 1 July 2000. In contrast, the general `time of supply' rules in the GST law would tax the full value of the goods supplied to a person from 1 July 2000 at the time those goods are made available to the recipient.

In addition, the GST applies to contracts entered into after the GST legislation became public on 2 December 1998. It is reasonable to expect that people entering into a construction contract after that date would consider the possibility of the actual construction spanning the introduction of the GST. The GST only applies to contracts entered into before 2 December 1998 if the contracts include a provision allowing the price to be reviewed to take account of the GST. Furthermore, builders benefit from the removal of wholesale sales tax from many products used in the construction of houses and other property.