housing

while promoting investment in innovative and high growth companies likely to
produce significant capital gains (Ralph 1999, p. 14).
The calculated capital gain allows for relevant capital costs associated with
acquiring and holding the asset. In addition, the CGT cost base is reduced to the
extent that capital works deductions have been claimed for income tax purposes. (In
contrast, depreciation claimed on fixtures and fittings is not deducted as these
‘depreciating’ assets are not subject to CGT.) However, where the taxpayer is
eligible for a discount, only part of the capital works deductions previously claimed
is subject to tax — the implications of this treatment are discussed in section 5.4.
The Government is considering the implications of including buildings and
structures in the uniform capital allowance system applying since 1 July 2001. This
would remove the capital works deductions provisions from CGT arrangements and
thus end the current discounting effect. However, the Government has indicated
that:
This measure raises a number of extremely difficult practical issues, including
separating land value from that of the buildings and structures, and defining the asset
unit (a single building or many smaller assets). In light of the need for significant
amounts of further work and competing tax priorities, the measure, if proceeded with,
will not commence until at least July 2005. (Coonan 2002)
Goods and services tax
From 1 July 2000, GST has applied (at a rate of 10 per cent) on the supply of most
goods and services in Australia. It is collected by the Australian Government, but its
proceeds are distributed to the states and territories.
GST was introduced by agreement between the Australian Government and state
and territory governments, as part of a package of tax reforms. This included the
removal and rationalisation of a number of state and territory taxes. As a transitional
measure, the Australian Government makes up any shortfall in state and territory
revenue occurring as a result of these changes. These shortfall payments, totalling
an estimated $370 million in 2003-04 (compared to GST revenue of some
$32 billion), have reduced over time (Costello 2003). In that year, only NSW and
Victoria are expected to receive shortfall payments, with NSW alone expected to
receive payments in the following two financial years.
In relation to land and housing, GST is imposed on:
• Vacant land sold by registered enterprises. However, there are some exemptions;
for example, sales of farm land and government land grants. As well, the
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