9 July 2025

Tax private school fees, healthcare insurance to get GST back on track, argues think tank

| By Claire Fenwicke
Join the conversation
22
A hand takes several notes of Australian currency from a wallet

The Australia Institute has argued adding private school fees and private health insurance to GST earnings would generate more than just chump change. Photo: Damien Larkins.

An independent think tank has argued GST needs to be applied to private school fees and private health insurance to stop states and territories from getting shortchanged.

The Australia Institute calculated states have lost out on $231 billion since GST was introduced in 2001 because revenue had failed to keep up with national income.

It estimated $22 billion in lost revenue for 2023-24 alone.

Australia Institute executive director Richard Denniss said the GST wasn’t doing its job.

“The GST was meant to be a secure source of funding for the jurisdictions to pay for things like schools and hospitals, but it has failed to live up to this goal,” he said.

“If GST had kept up with economic growth, as it was meant to do, the Northern Territory, Queensland and South Australia could have had budget surpluses.

“Other jurisdictions would be in a much healthier position.”

READ ALSO Finance takes control of Services Australia and welfare payments

According to Australian Bureau of Statistics government finance data from 2025, quoted in the report, the ACT had an actual budget cash balance of negative $1,226,000,000 for the 2023-24 budget.

If it had received the same GST/GDP [gross domestic product] share provided in 2001, the ACT could have picked up an extra $460,000,000 in revenue, resulting in a potential cash balance of negative $766,000,000.

data table

State and Territory budget outcomes in 2023-24 if they received the same GST GDP share provided in 2001. Photo: The Australia Institute.

Mr Denniss pointed to inequality as a reason why Australia was collecting less GST.

“This is because higher-income households are spending more on rent and mortgages, which means they have less money to spend on the things that would generate GST revenue,” he said.

Mr Denniss suggested an option for the Commonwealth to fill the “tax-blackhole” without unfairly impacting on low-income households.

“It could broaden the GST so that it applies to private school fees and private health insurance,” he said.

“Alternatively, it could close tax giveaways like the Fuel Tax Credits Scheme, or raise new taxes on wealth, or the gas industry.”

GST is a broad-based tax of 10 per cent on most goods, services and other items sold or consumed in Australia, such as most staples and basic foods, healthcare, education, childcare, financial supplies and exports.

The Australia Institute estimated broadening GST to include private school fees and health insurance would generate an additional $1.8 billion per year.

It’s expected almost half of the revenue (43 per cent) would come from the top 20 per cent of income earners and seven per cent would come from the bottom 20 per cent of households.

The institute also argued adding additional taxes to the revenue pool could bridge the final funding gap to give jurisdictions a more sustainable revenue stream into the future.

“This could come in the form of new taxes, or by expanding existing taxes by closing tax concessions,” the report noted.

“The GST funding shortfall is an opportunity for broader tax reform that could include the introduction of more efficient and equitable taxes.”

READ ALSO Clothes sales up, food shopping down: ABS

ACT Treasurer Chris Steel pointed to the Commonwealth Grants Commission’s updated GST relativities (which determines how revenue is distributed) had resulted in a cumulative $184 million loss for the Territory over four years to 2028-29.

“This is largely due to Victoria’s pandemic circumstances, leading to a short-term GST sharing relativity change between jurisdictions,” he said.

But Mr Steel went on to state the debate about GST-sharing relativities between jurisdictions was “effectively a zero sum game” and missed the point.

“Vertical Fiscal Imbalance is becoming more of a problem in Australia,” he said.

“It is the states and territories who deliver frontline services and who are now managing an extraordinary growth in demand and costs in our hospitals, without significant means to raise additional own source revenue to support it.”

He said the greater problem for the ACT specifically was the “systemic undercount” of the Territory’s population by the ABS between census surveys.

“[This] has had an ongoing impact on the ACT Budget and resulted in less GST revenue to fund the cost of delivering services and infrastructure to the actual size of our community,” Mr Steel said.

Discussions with the Commonwealth on improving net interstate migration methodology and data have been ongoing for years.

Region reached out to the Federal Government for comment.

Free Daily Digest

Want the best Canberra news delivered daily? We package the most-read Canberra stories and send them to your inbox. Sign-up now for trusted local news that will never be behind a paywall.
Loading
By submitting your email address you are agreeing to Region Group's terms and conditions and privacy policy.

Join the conversation

22
All Comments
  • All Comments
  • Website Comments
LatestOldest
Kirsten Anker2:03 pm 10 Jul 25

Interesting that WA is the only state without a deficit. It seems fair to increase federal taxation on mining activities so that the benefit of extracted national resources is spread across the whole nation.
And certainly, add GST to private school fees and send the money to the public system. If money buys better education, it is unfair that schools are not all equivalently funded and children offered the same opportunity.

The private schools are incredibly over-funded, and are even better equipped than many universities.

The old Vertical Fiscal Imbalance ate my budget excuse is unacceptable Mr Steel. While VFI between Commonwealth and States/Territories is a problem, it’s existed for decades, so you just need to balance the budget accordingly.

“independent” think tank were the common thread for executive directors is previously working as a policy adviser to the Greens.

Australia has the highest minimum wage in the world- and still nobody can afford a house. The country is broken.

Claire – This article fundamentally misconstrues the point the Australia Institute was making. The headline is grossly misleading.

The actual point was that expanding GST would be capture $X but it would be regressive. They then go on to clearly identify that closing tax giveaways like Fuel Tax Credits or raising new taxes on wealthy and the gas industry (particularly gas) could be directly pooled to the GST bucket for distribution to the States.

They could always improve public schools to make private schools less attractive
They won’t.

It’s crazy to think that households that are on higher levels of income also don’t have a budget. To think that they won’t change spending if they get taxed more.

There is a think tank called ‘The Rest of the World’ and they thought 100% renewables was too expensive.

We only follow advice when we can spend more of tax payers money.

There was no need to even open this article to know that the brain snap came from the far left and laughably named Australia Institute.

Even funnier, they probably have made up their minds that not taxing private school fees – which help lift Australian education standards – should be considered a ”concession”. Likewise private health insurance, which takes pressure off the public system. Such blissful ignorance. Such envy of hardworking successful Australians.

Capital Retro9:30 am 10 Jul 25

I look forward to the day when the Australia Institute is financially destitute.

The Guardian, their media mouthpiece is almost broke and can’t keep a political reporter.

But there’s always a wealthy anti-capitalist lefty who’s made their money in a capitalist economy who’s happy to fund them.

Capital Retro11:25 am 10 Jul 25

Is his first name Malcolm?

Could be the ghost, could be that cannon-something, could even be that Saturday paper bloke. Most lefties are too stingy to pull out their wallets so it’s probably one of those three.

Daily Digest

Want the best Canberra news delivered daily? Every day we package the most popular Region Canberra stories and send them straight to your inbox. Sign-up now for trusted local news that will never be behind a paywall.

By submitting your email address you are agreeing to Region Group's terms and conditions and privacy policy.