GST Rate Change

[artemis]

The 2.2% increase is worked out as follows:

When GST was 12.5%, an item costing $10 before GST was $11.25 with GST.

Now GST is 15%, the same item costing $10 before GST now costs $11.50 with GST.

So the cost has increased by 25 cents, which is 2.2% of $11.25.

PS Oops, didn't notice that a couple of posters already did the sum!

[kyotolaw]

drelly - I'm in the same boat as you - self-employed.

Not trying to rock the boat here - just trying to imagine what Treasury is thinking when trying to cut costs and not give the beneficiaries the full compensation for the GST increase.

[drelly]

Kyoto,

I haven't raised rents because of GST but based on what I spend on R&M, it will cost me about another $500 or so a year. I'm also absorbing some of the GST increase within my business. Someone, somewhere will pay for the perceived cost of GST raises. For someone like me who is self employed, tax cuts don't really count for anything until end of year anyway.

[Wayne]

How many of us have limited rent increases to $5.50 a week?

How many have raised rents?

[kyotolaw]

drelly,

If I was a Treasury boffin and wanted to split hairs with you...

Maintenance and property management are only likely to be a small cost of holding a property - the majority will be interest costs and implied cost of capital (both GST exempted).

If Property Management and maintenance are combined 10% of costs and they go up by 2.2%, that is an increase of 0.22%, or 66c per week on a rental of $300/week.

Build costs - lets say $350,000 to build a 3BR house = GST increase of $7,700 (350,000*0.022) to be recovered over lifetime of 30 years of the house (7,700/30/52). $4.93/week. (PS - Treasury now thinks your house actually will last for ever, so 30 years may be generous...)

Which is why Treasury is expecting you not to put your rents up.

How many of us have limited rent increases to $5.50 a week?

[drelly]

So Treasury is expecting us all not to raise our rents with the GST increase... How likely is that?

Pretty unlikely I'd say. New build costs will filter through eventually and of course, the impact on maintenance and property management is immediate.

[kyotolaw]

With regard as to why the benefits only went up 2.02% instead of 2.22%...

The boffins at Treasury figured out that some expenses of beneficiaries don't have GST included. This would be "residential rents" (Gasp!), "repayments on mortgages" (giggle!), and "interest on consumer debt".

So Treasury is expecting us all not to raise our rents with the GST increase... How likely is that?

[Wayne]

Was $112.50
Now $115
Difference $2.50
Amount of increase divided by original amount
= 2.5/112.50
= 2.22% increase in price.
Yes?
No?
.

correct - not so hard really

[Perry]

All Bollard's Fault

Note how the 3c per litre fuel tax increase has been cunningly hidden within this scenario.

So for any goods and service providers with a fuel cost component (ie most) the actual cost structure has risen by more than the GST increase.

No-one seems to be mentioning this right now.

Likewise, Bollard warns retailers, including utility
companies, not to use the GST rise as an excuse
for hiking prices generally.

Just a shame he forget to also so
admonish his political masters, eh?

[muppet]

A product priced at $100 excluding GST sells for $112.50 with GST.
With GST rising to 15% it would sell for $115.
This is an increase of 2.22%

And to calculate the GST component of a GST inclusive amount, multiply the figures by 3 and then divide by 23. (or else get a calculator)

[flyernzl]

Note how the 3c per litre fuel tax increase has been cunningly hidden within this scenario.

So for any goods and service providers with a fuel cost component (ie most) the actual cost structure has risen by more than the GST increase.

No-one seems to be mentioning this right now.

[One]

The Wellington woodenheads reckoned that some companies will absorb the extra GST, so the average rise will only be 2.02%. The average rise due to GST, that is. They don't care that some companies will take the chance to put prices up more than GST. That's just general inflation so they're not compensating beneficiaries for that.

Seems a bit disingenious to me.

[Perry]

Actually, Tweedle Key didn't quite say what
I said he said. He said:

We've cut all personal income tax rates, GST
has increased to 15%, and we've boosted NZ
Super, Working For Families, and benefit pay-
ments by 2.02% to compensate for the rise
in GST.

So, explain to me how a price increase of 2.22
is compensated by a 'pay' boost of 2.02%?
Did the W'gton woodenheads win 0.2% or is
my maths so bad I should be banned from
using a calculator?
.

[Perry]

It looked like you were asking how much by a percentage GST increase by not how much an item cost with the new gst by percentage!

I did say that maths wasn't my strong point.
So yes, I did express that badly and the right
answer to the wrong question was . . . right.

[Perry]

Was $112.50
Now $115
Difference $2.50
Amount of increase divided by original amount
= 2.5/112.50
= 2.22% increase in price.
Yes?
No?
.