BOARDING HOUSES AND THE GST

The figures quoted tonight regarding the impact of the GST on boarding

house rents were incorrect.

The final report by Econtech showed only minimal difference between the

concessional GST treatment of boarding house rents and input taxing such

rents in the short-term.

In the long-term the study found that boarding house rents subject to

concessional GST treatment were substantially lower than those input taxed.

It should be noted this is not Government modelling, but independent

modelling by Econtech.

Econtechs results were as follows:

Estimated percentage increase in rents

Short-term Long-term

Boarding Houses 4.0 1.5

Concessional GST

Boarding Houses 3.6 3.1

Input taxed

The short-term results are broadly similar, particularly given they are

only indicative estimates.

In addition, the long-term savings may flow through sooner than assumed

by Econtech. A new entrant to the boarding house market or an existing

supplier providing services with new buildings or furnishings after tax

reform would be able to operate at a lower cost. This competitive pressure

would lower all rents.

Increases in rents will be more than compensated through both increased

pensions and higher rent assistance.

19 June 2000

Media contact: David Alexander (02) 6277 6390