Greens Alert: Anticipated Rise in Food Prices with 'Simplistic' GST Proposal; Paterson Praises Plan as 'Daring'

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The Coalition and Greens have expressed concerns about raising the goods and services tax (GST), specifically the suggestion to eliminate exemptions on essential items like fresh food.

Independent MP Kate Chaney told SBS News that politicians need the courage to increase the GST from 10 to 15 percent, arguing that Australians would ultimately benefit, despite any potential price rises.

The proposal to increase the GST, developed by economist Richard Holden, recommends removing exemptions on items such as food, childcare, and health insurance, though it plans to mitigate some of these costs with upfront payments or tax exemptions.

Chaney shared the model ahead of an economic reform summit organized by Treasurer Jim Chalmers.

Nick McKim, the Greens’ spokesperson for economic justice, criticized the idea of taxing fresh food and utilities instead of increasing corporate tax, calling it “lazy.”

“Since the pandemic, the cost of essentials has skyrocketed, and the best idea the teals can come up with is to make food more expensive,” McKim said in a statement.

“If we are serious about easing cost of living pressures, we should be making big corporations and the super wealthy pay their fair share of tax.”

Meanwhile, James Paterson, the Opposition’s finance spokesperson, remarked that it would take an “incredibly brave government” to implement taxes on insurance or private education fees, which are currently GST-exempt.

Close-up of a man with glasses, wearing a suit.

Opposition finance spokesperson James Paterson has labelled a proposed GST increase as “brave”. Source: AAP / Mick Tsikas

“The Howard government recognised that people who spend their money on private health or private education are actually taking a burden off the public purse, and therefore it would be unjust to tax them on top of that,” Paterson told Sky News.

Prime Minister Anthony Albanese refused to weigh in, stating, “people are entitled to put forward their views” ahead of Chalmers’ productivity roundtable, to be held from 19 to 21 August.

Here’s what’s being proposed and why it would impact your grocery bill.

What changes are being proposed?

Chaney and Holden are proposing the GST be increased for the first time since its introduction by former prime minister John Howard, which came into effect in July 2000.

Current exemptions on food, education, healthcare and childcare services, as well as water and sewage, would be removed under the proposal.

For items currently exempt, Holden expects a large portion of the 15 per cent to be passed onto the consumer, with smaller increases for goods already taxed under the GST.

The effect on low-income earners would be mitigated by one of two options under a GST-free threshold:

Providing an annual $3,300 up-front payment to all Australians over 18 years old;
Or exempting the GST on the first $22,000 in transactions when you swipe your registered debit or credit card at the checkout.

According to the Parliamentary Budget Office, the proposed changes would generate an additional $23.8 billion in revenue, even after the GST-free threshold is applied to all Australians.

A woman in a blazer stands up in the House of Representatives.

Independent MP Kate Chaney believes the increased revenue could help address issues like bracket creep and inequality within the tax system. Source: AAP / Lukas Coch

Chaney told SBS News this leaves potential to fund “budget repair” or reduce income taxes for higher income earners.

“We could actually decrease the marginal tax rate for the top two brackets by five percentage points, and index everybody’s tax brackets going forward, and still have $10 billion left for budget repair without it disproportionately affecting low-income earners,” she said.

The report suggests that the tax rates be reduced from 45 per cent to 40 per cent and from 37 per cent to 32.5 per cent, respectively, with the indexation future-proofing bracket creep — a term that describes a situation where income growth causes individuals to pay higher average income tax rates each year.

A tax reform debate has been brewing ahead of the round table, with leaked documents last month showing Treasury has advised the government to raise taxes and cut spending after the election.

How will the changes impact social inequality?

While Holden acknowledges the increase will be passed onto consumers, he said Australia’s current system does damage to social equality.

“Australia has a very unusual tax system relative to other OECD economies. We get about twice as much of our revenue from income taxes and about half as much of our income from the GST compared to other advanced economies,” he told SBS News.

“That has real implications, it hurts social mobility and damages intergenerational equity, because we’re relying on income taxes from people of working age.”

Both of which he thinks will be improved by the changes.

Cassandra Goldie, CEO of the Australian Council of Social Service, said a higher GST would undermine fairness, while doing nothing to improve economic efficiency.

“The extra revenue we need to fund care and community services, schools, and an income support system that protects people from poverty must come from those with the most capacity to pay — not those doing it the toughest,” Goldie said.

The 2025 data found Australia’s personal income tax rate was the fourth highest across OECD countries, at 25 per cent for a single adult with no children.

But Australia has one of the lowest overall “tax wedges” of all OECD countries, with Australians taking home almost 70 per cent of their gross wages when factoring total personal income and payroll taxes, as well as social security contributions, well above the OECD average of 65 per cent.