With housing supply falling short of every target set for it, a formal campaign to parliament argues that 10 per cent GST on new residential construction is adding tens of thousands of dollars to every build and making the problem worse.

Australia needs to build more homes. Nobody disputes that. The federal government’s target of 1.2 million new dwellings over five years has already accumulated a shortfall of more than 77,500 homes according to Master Builders Australia, and the pace required to catch up now exceeds anything this country has previously delivered. The 2026-27 federal budget committed a $2 billion Local Infrastructure Fund to drive housing supply, but the structural cost barriers sitting beneath every new build remain largely untouched.

Into that context, a formal petition to parliament has landed with a straightforward proposition: remove the 10 per cent Goods and Services Tax from new residential construction.

The campaign is led by SMATS Group Executive Chairman Steve Douglas, a tax and investment advisory firm. His argument is not complicated. GST adds between $35,000 and $59,000 to the average cost of building a new home depending on the state or territory. Over the 2024-25 financial year, Australians paid an estimated $7.4 billion in GST on residential construction. That is money flowing out of housing supply and into consolidated revenue.

The petition argues it does not need to.

What the GST Actually Costs on a New Build

Under Australia’s current tax system, GST at 10 per cent applies to newly built homes and apartments. It does not apply to established residential property. That distinction matters, because it creates a direct cost penalty on exactly the type of activity the country most needs to encourage. As TGB has previously reported, half the price of a new home in Australia is tax, including GST, stamp duty and infrastructure charges stacked on top of each other.

According to figures cited in the petition and drawn from ABS and industry data, the GST component embedded in an average new home breaks down by state as follows.

In practical terms, that is a line item on every new build that does not exist for buyers of existing homes. For a client weighing up whether to build or buy established, it is not a minor consideration. For a builder pricing a job and watching margins compress, it is structural.

“GST simply does not need to be on new residential construction as the GST revenue passes to the states and they are increasingly benefiting from the dramatic increase in stamp duty charges.”

The Supply Argument

The petition frames housing affordability as fundamentally a supply problem, not a demand problem. That position is well supported by the data. The 2026 State of the Housing System report from the National Housing Supply and Affordability Council found that in 2024-25, housing completions fell almost 67,000 dwellings short of the annual target implied by the National Housing Accord. To meet the five-year target, Australia now needs to deliver around 260,000 new homes per year. That number has never been achieved.

HIA data also shows Australia remains short of its housing needs by close to two million homes, with population growth continuing to outpace new supply. New home starts are still well below the decade average.

The petition argues that removing GST from new residential construction would immediately reduce the cost of building a home by 10 per cent and cut the price of new apartments by approximately 6 to 7 per cent under current GST margin scheme arrangements. Lower costs mean improved development feasibility. Improved feasibility means more projects proceed.

For builders, that logic is familiar. Projects that are marginal on paper do not get started. And in the current environment, too many projects are marginal.

The Negative Gearing and CGT Context

The petition arrives as the federal government’s proposed changes to negative gearing and capital gains tax are before parliament. As TGB has covered in detail, the negative gearing changes preserve concessions for new builds while removing them for existing property purchases from July 2027. The government’s argument is that making existing property investment less attractive will free up housing stock for owner-occupiers and first-home buyers.

Critics argue the intervention targets the wrong end of the problem. The SMATS petition takes a pointed position: if the objective is improved housing affordability and supply, removing GST from new construction would do more, faster, than changing investor tax settings on established properties.

It also raises a concern shared by other industry bodies, including Master Builders Australia and the Property Council, that reducing investor participation before the supply shortage has been resolved could place additional upward pressure on rents if fewer landlords enter the market.

What About the Budget Impact?

The most politically sensitive aspect of the proposal is the revenue question. GST is collected by the federal government but distributed to the states and territories. Removing it from residential construction would reduce that revenue flow.

The petition argues the impact would be limited. GST collections are forecast to grow from $99.3 billion in 2025-26 to $109.2 billion in 2026-27, an increase of almost $10 billion in a single year. Against that backdrop, the petition contends that any reduction from removing the housing construction component would be offset by broader GST pool growth, rising stamp duty revenues, and increased construction activity.

There is also the double-dip argument. Many new homes currently attract both GST and stamp duty, creating what Douglas describes as a compounding tax burden on newly created housing supply. State governments are already collecting rising stamp duty revenue as property values increase. The petition argues that offsetting a reduction in GST through existing and growing stamp duty receipts is not unreasonable.

Whether that arithmetic holds up to Treasury scrutiny is a separate question. The petition does not claim to be a budget modelling exercise. It is a policy argument, and as policy arguments go, it is one that sits squarely on the supply side.

What This Means for Builders

The GST question is not abstract for builders. It affects the price clients pay, which affects whether clients proceed. It affects project feasibility across the development pipeline. It shapes the economics of every new home started. As TGB has documented, Australian residential construction costs have risen around 47 per cent since the pandemic, and the situation is worsening in some markets.

Labour remains the primary constraint, with skilled trade rates rising 12 to 18 per cent as demand outstrips availability. Material supply has broadly stabilised, but is still elevated. Against that backdrop, the GST adds a fixed 10 per cent cost that builders cannot engineer away, cannot negotiate, and cannot offset with efficiency. It is simply there.

If the petition gains traction, the most immediate effect for builders would be improved client affordability at the new build end of the market. That matters particularly for first-home buyers who are already turning to new builds as established property becomes less accessible. Projects that currently sit at the margin of what clients can fund would become more viable. That has flow-on effects for starts, trades, and the broader supply chain.

It would also remove a structural disadvantage that new builds carry relative to established property. The current system, where a buyer of an existing home pays no GST but a buyer of a new build effectively does, is not a neutral position. It is an embedded incentive to buy existing over building new, at precisely the moment the country needs the opposite.

The Petition Is in Parliament Now

The campaign has submitted a formal petition to the Federal Parliament. The timing, alongside the ongoing debate about negative gearing and CGT reform, gives it a practical hook. The argument being made is not merely that GST on housing is bad policy in isolation, but that it is the wrong kind of tax at the wrong time, when every available lever should be pulling in the direction of more supply.

Whether the petition moves policy or remains a point of public pressure, the underlying economics it describes are real. Builders who have watched feasibility tighten, watched clients hesitate, and watched starts fall short of targets will recognise the numbers.

The question being asked is reasonable. Whether it gets a reasonable answer is another matter.

THE GOOD BUILDER TAKE

The numbers in this petition deserve attention. Adding $35,000 to $58,000 to the cost of every new home is not an invisible policy detail. It is a real number that flows through to the price builders quote, the margins they work with, and the decisions clients make.

The broader argument, that Australia’s housing challenge is a supply problem rather than a demand problem, is one that most builders understand from direct experience. The volume of work available is not the constraint. It is the cost and time required to bring that work to life.

Whether removing GST from new residential construction would unlock the supply response the country needs is a legitimate policy question. What is not in question is that the current tax treatment creates a clear disincentive to build new over buying existing. That distortion is worth fixing regardless of what happens with negative gearing and CGT.

Watch this space. The petition is in parliament. The pressure on housing policy is not going away.

Last updated: June 2026. GST figures sourced from SMATS Group petition citing ABS Building Approvals and industry data. Housing supply data sourced from Master Builders Australia (April 2026), HIA 2026 Planning Blueprint Scorecard, and HIA housing starts data (January 2026). Construction cost data sourced from Master Builders Australia, HIA, and independent market sources.

Your Questions Answered:

Answers to common questions about GST and new home construction in Australia.

Does GST apply to new homes in Australia?

Yes. Under the current Australian tax system, a 10 per cent Goods and Services Tax applies to the sale of newly built homes and apartments. This means that when a builder sells a new home, GST is embedded in the purchase price. The tax does not apply to the sale of established residential property, creating a direct cost difference between buying new and buying existing. Builders registered for GST can claim input tax credits on their business costs, but the net effect is that new home buyers pay a GST component that established property buyers do not.

How much does GST add to the cost of building a new house?

According to figures cited in the SMATS Group petition to parliament, drawing on ABS and industry data, GST currently adds between $35,000 and $59,000 to the average cost of a new home in Australia depending on the state or territory. The estimated amounts range from $35,450 in South Australia to $58,641 in the ACT, with Queensland at $45,469, NSW at $50,757 and Victoria at $53,553. Across Australia, the campaign estimates Australians paid around $7.4 billion in GST on residential construction in 2024-25.

Why is GST charged on new homes but not established properties?

Australia’s GST system, introduced in 2000, applies to most goods and services but treats the sale of existing residential property as input-taxed. This means no GST is charged on the sale of an established home and the seller cannot claim input tax credits on associated costs. New residential construction, however, is a taxable supply. The policy rationale was to apply GST broadly to new economic activity while not taxing the transfer of existing assets. Critics, including the SMATS Group petition, argue this creates a structural distortion that makes building new more expensive than buying established at exactly the moment Australia needs to lift supply. Proponents of removing GST from new housing argue the distortion no longer serves any useful policy purpose and actively works against housing supply goals.

Would removing GST from housing construction increase supply?

The SMATS Group petition argues yes. The mechanism is straightforward: lower construction costs improve project feasibility, and more projects at or above the feasibility threshold means more homes get built. The petition estimates that removing GST would immediately reduce the cost of a new home by 10 per cent and cut apartment prices by approximately 6 to 7 per cent under current margin scheme arrangements. For projects currently sitting at the margin of commercial viability, that shift could be the difference between proceeding and being shelved. The broader picture is that Australia needs to build around 260,000 new homes per year to meet its National Housing Accord target, a pace never previously achieved. Any measure that reduces the cost barrier to new construction is relevant to that challenge. Opponents might note that supply is constrained by planning, trades and land availability as much as cost, and that removing GST alone would not resolve those bottlenecks.

What is the difference between GST and stamp duty on new homes?

GST and stamp duty are separate taxes that can both apply to a new home purchase, creating what the SMATS Group petition describes as a double-dip burden. GST is a federal tax of 10 per cent applied to the construction and first sale of a new home. It is collected by the federal government and distributed to the states. Stamp duty is a state tax applied to property transactions, calculated as a percentage of the purchase price. It applies to both new and established property, though some states offer concessions or exemptions for first-home buyers purchasing new builds. The key difference is that established property buyers pay stamp duty only, while buyers of new homes can face both GST embedded in the purchase price and stamp duty on the transaction. Combined with developer infrastructure charges and council contributions, the tax component of a new home can represent a substantial portion of total cost.

Author: TGB Editorial