Should Australia increase the GST from 10% to 15% if it means lower income taxes and more support for households?
That question is receiving renewed attention following calls for broader tax reform from former Federal Treasurer Josh Frydenberg and the Grattan Institute.
The debate comes at a time when Australians are managing higher household expenses, housing costs and pressure on family budgets.
Supporters argue that increasing the GST could help fund income tax reductions, higher government payments and essential services.
Critics question whether households could afford higher prices, particularly before receiving any compensating tax relief.
RJS Director Roy Sanderson has also weighed in, outlining conditions he believes should accompany any GST increase.
Is Australia's GST increasing to 15%?
No. Australia's GST remains 10% on most taxable goods and services.
There is no enacted increase to 15%.
The current discussion involves policy proposals from economists and public figures, rather than an announced government tax change.
Opposition Leader Angus Taylor rejected the suggestion of raising the GST during the cost-of-living crisis.
The Federal Government has also criticised proposals to increase the rate.
Current GST rate: 10%
Proposed GST rate: 15%
The 15% rate is part of the public policy debate. It is not the GST rate currently payable by Australian consumers or businesses.
What has Josh Frydenberg proposed?
Former Treasurer Josh Frydenberg has called for a national discussion about increasing the GST and removing some exemptions.
His argument is that a broader GST could provide revenue to support a substantial reduction in income tax.
The objective would be to change the balance between taxes on earnings and taxes on spending.
That approach could affect households differently depending on their income, spending patterns and eligibility for compensation.
A higher GST would also require consideration of how the additional revenue is distributed between governments.
What does the Grattan Institute recommend?
In October 2026, the Grattan Institute proposed increasing the GST from 10% to 15% and extending it to all food.
The Institute estimates the combined changes could raise approximately $76 billion annually.
Its proposal includes using much of the additional revenue to reduce income taxes and increase welfare payments.
The proposed allocation is:
- Approximately $33 billion for personal income tax cuts.
- Approximately $25 billion for higher government support payments.
- Approximately $18 billion to support state government finances.
The Institute's proposal includes an 8% increase to pensions, higher JobSeeker and Youth Allowance payments, and increased Rent Assistance.
These figures are estimates for a proposed reform package, not funding allocations approved by Parliament.
Would raising GST from 10% to 15% increase prices by 5%?
Not exactly.
GST is calculated as a percentage of the price before tax.
An item costing $100 before GST currently attracts $10 in GST.
At 15%, the GST would be $15.
A product costing $100 before GST
At the current 10% GST rate:
$100 + $10 GST = $110
At a proposed 15% GST rate:
$100 + $15 GST = $115
The difference would be $5.
That represents approximately a 4.55% increase in the final price of an item that currently costs $110 including GST.
This assumes the pre-GST price remains unchanged and the full tax increase is passed to the customer.
What happens if GST is extended to food?
Under current Australian GST rules, many basic foods are GST-free.
Examples include certain fresh fruit, vegetables, meat, milk and bread.
Other products, including many prepared meals and confectionery items, are already taxable.
The Grattan Institute proposes extending GST to all food as part of its reform package.
That would create a different price impact from increasing the rate on items that already attract GST.
| Purchase | Current treatment | Illustrative proposed treatment |
|---|---|---|
| $100 item before GST | $110 including 10% GST | $115 including 15% GST |
| $100 of currently GST-free basic food | $100 | $115 if the exemption were removed and 15% GST applied |
| $1,000 purchase before GST | $1,100 including 10% GST | $1,150 including 15% GST |
These calculations illustrate the direct arithmetic effect of GST.
Actual consumer prices would depend on business pricing, market conditions and the final design of any reform.
Who could be most affected by a higher GST?
GST is a consumption tax. Its impact depends on what households buy and how much they spend.
Lower-income households often spend a larger share of their available income on day-to-day living expenses.
Without compensation, a higher GST could place additional pressure on those budgets.
Retirees and people receiving government payments may also be affected because they may have less income tax to offset against higher consumption costs.
Higher-income households could pay more GST in dollar terms because they generally spend more overall.
The final distributional effect would depend on the compensation package and which goods and services were brought into the GST base.
Could income tax cuts offset higher GST?
That is a central argument for the proposed reform.
A government could use additional GST revenue to reduce personal income tax rates or change tax thresholds.
This could leave some working households paying less income tax while paying more GST on purchases.
The net effect would depend on income and spending patterns.
For example, a household receiving $1,500 in annual income tax relief but paying $1,000 more in GST would be $500 ahead before considering other changes.
A household receiving only $200 in tax relief while paying $1,000 more GST would be $800 worse off.
These are illustrative figures, not forecasts of any proposed package.
Roy Sanderson's view: What should accompany a GST increase?
In RJS TV, Roy Sanderson expressed conditional support for considering a higher GST.
His view is that a GST increase should be accompanied by measures to protect households from higher living costs.
Roy suggested two specific changes.
1. Increase the income tax-free threshold to $30,000
The current tax-free threshold for Australian resident individuals is $18,200.
Roy suggested increasing that threshold to $30,000 as part of a broader tax reform package.
This would reduce income tax for some working Australians, depending on how the other tax brackets and offsets were adjusted.
A change to the threshold alone would not necessarily provide the same benefit to every taxpayer.
2. Increase pensions and government support payments by 5%
Roy also suggested a 5% increase to pensions and government support payments as compensation.
This recognises that people receiving pensions and other support payments may not benefit from income tax reductions in the same way as working taxpayers.
The proposed 5% increase is Roy's preferred policy measure.
It is separate from the Grattan Institute's proposed payment increases.
What could a higher GST mean for businesses?
A change to the GST rate would affect more than consumer prices.
GST-registered businesses would need to review pricing, invoicing, accounting systems and reporting.
Pricing
Businesses may need to update advertised prices, quotes and customer agreements.
Accounting systems
GST codes, point-of-sale systems and invoice templates may require changes.
Cash flow
A higher GST component may increase amounts collected and later remitted to the ATO.
Customer demand
Higher consumer prices could affect demand for some goods and services.
Registered businesses generally claim eligible input tax credits for GST included in business purchases.
This means a GST rate increase does not automatically increase every registered business's net tax cost by five percentage points.
The effect would depend on the business's supplies, purchases and eligibility for GST credits.
Why do some economists support a higher GST?
Supporters argue that a broader consumption tax could help governments raise revenue while reducing reliance on income taxes.
They also point to long-term budget pressures associated with health care, ageing populations and public services.
The Grattan Institute argues that additional GST revenue could support both income tax reductions and higher welfare payments.
It also proposes allocating part of the revenue to states to improve their finances.
Why do others oppose the increase?
Opponents raise concerns about household affordability, particularly during a period of high living costs.
They also question whether promised compensation would fully offset higher prices for all households.
The impact could vary significantly between a household with two working adults and one relying mainly on government payments.
Another concern is whether the revenue would be used as proposed over the long term.
These are important questions for any future policy design.
What should households and businesses do now?
Australia's GST remains 10%. No immediate change is required.
Review household spending or business GST arrangements.
Assess potential income tax changes and compensation, not GST in isolation.
Make changes only when specific reforms are announced and legislated.
Frequently asked questions
Is GST increasing to 15% in Australia?
No. GST remains 10%. Increasing it to 15% is currently a policy proposal, not an enacted change.
Would everything cost 5% more?
Not necessarily. For an item already subject to 10% GST, moving to 15% would increase the final price by approximately 4.55%, assuming the pre-tax price stays the same and the increase is fully passed on.
Would fresh food become taxable?
The Grattan Institute's proposal includes extending GST to all food. No such change has been enacted.
Would income tax decrease?
Some reform proposals include income tax reductions funded by additional GST revenue. The outcome would depend on the final design of any legislation.
Is the tax-free threshold increasing to $30,000?
No. Roy Sanderson has suggested this as a condition for supporting GST reform. It is not an announced change to the tax-free threshold.
Would pension payments increase by 5%?
Roy has suggested a 5% increase to pensions and government support payments. This is his policy position, not an enacted increase.
Should businesses change their GST systems now?
No. Businesses should continue applying the current GST rules and monitor official announcements before making changes.
The bigger question is how the tax system should work
Increasing GST would affect households, businesses and government revenue.
The financial result would depend on more than the GST rate itself.
Income tax changes, compensation payments and the goods and services included in the tax would all matter.
Roy Sanderson's position is that any increase should be considered alongside meaningful income tax relief and support for people receiving government payments.
For now, Australians should continue applying the current tax rules while following developments in the reform debate.
Want to understand how tax reform could affect you?
Your RJS accountant can help you understand your current tax obligations, review business GST arrangements and assess the implications of any future changes.
Speak to an RJS AccountantSources and further reading
Australian Taxation Office: Goods and Services Tax Overview
Grattan Institute: Raise the GST to Fund Australia's Future
Grattan Institute: The GST Needs a Refresh
Information current as at 27 October 2026. Policy proposals may change and are not enacted tax law.
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