Western Australia’s premier, Colin Barnett, has been criticised by the Australian Council of Social Services for suggesting people would not notice if the goods and services tax were applied to fresh food.



Barnett said the fresh food exemption “unnecessarily complicates matters”, and should be removed, the West Australian reported. “I don’t think people would really notice it to any great extent,” he said.

He said the change should be introduced before lowering the GST-free threshold on international online shopping from $1,000 to $100, lobbied for by the New South Wales government and retailers, but he told Guardian Australia any change should be made in conjunction with a “fairer” distribution model.

The chief executive of the Australian Council of Social Services, Cassandra Goldie, said any increase to GST would disproportionately affect people on low incomes.

Fresh food has been exempt from the GST since its inception in 2000, originally as part of a deal struck with the Australian Democrats.

Goldie said people on low and moderate incomes spent a higher proportion of their income on basic expenses such as fresh food and would be less likely to be able to absorb any increase.

“It’s really important that we make sure that fresh food is affordable and accessible to all people,” she said. “There are plenty of other parts of the tax system that we should be looking at first to raise revenue.

“Before we talk about taxing fresh food we should look at closing down tax loopholes, administering trusts and what we should do about the tax breaks around superannuation that are clearly disproportionately benefiting those on higher incomes or with significant wealth – that’s the debate we have got to have.”

The treasurer, Joe Hockey, told Channel Seven’s Sunrise program this month the government did not have the “financial capacity” to provide the tax breaks to middle- and low-income Australians that would need to accompany an increase to the GST.

He said it wasn’t the “right time” to increase the GST as there was “enough pressure on family budgets as it stands”.

The finance minister and acting treasurer, Mathias Cormann, confirmed that position to Guardian Australia on Monday, saying the government had “no plans to change either the base or the rate of the GST”.

“Any suggestions to improve our tax system will be considered through the tax white paper review process next year,” he said.

The white paper will address the horizontal fiscal equalisation model of distributing GST revenue to the states, which Barnett has been campaigning against in favour of a per-capita model since becoming premier in 2008. WA was a net beneficiary of GST until the mining boom in 2007-08.

The WA treasurer, Mike Nahan, told Guardian Australia the state would not support any changes to the GST unless the horizontal fiscal equalisation model was scrapped in favour of per-capita distribution.

The Barnett government has already scored a minor win in its campaign for a greater share of GST revenue, with Hockey writing to the Commonwealth Grants Commission on 23 December to request advice on how to account for “volatile” state revenue – such as mining royalties – when calculating a state’s share of the GST.

GST revenue is calculated based on commodity prices taken at three-year intervals, which Nahan said left an unfair lag between the revenue loss caused by the sharp fall in iron ore prices and the state’s GST share. Iron ore prices have fallen 48% in state government forecasts from US$122 a tonne to US$75 a tonne, wiping $7.1bn in royalties out of the forward estimates.

Nahan said WA was “forced” into relying on volatile mining revenues by the existing GST system.

But the chief executive of the Grattan institute, John Daley, said WA should have seen the fall coming. “Clearly the dip is larger than was forecast by the WA government and the federal government, but there have been a lot of people – including Standard & Poor’s – for a long time saying they expected the iron ore price to drop quite markedly,” he said.