18 October 2018
Media Release - #2018030, 2018

A fairer and more sustainable GST system

Every state and territory will be better off under legislation introduced into Parliament today that will deliver a fairer and more sustainable distribution of the Goods and Services Tax (GST).

Our reforms will deliver an additional $9 billion in extra untied funding to the states and territories over 10 years and an additional $1 billion in perpetuity once fully implemented.

The current GST distribution system is not working, with Western Australia recently receiving just 30 cents in the dollar, while other states and territories with far smaller populations received more.

This is not only unfair and unsustainable, but it threatens the integrity of the GST system.  That’s why we asked the Productivity Commission to review the GST distribution system.

The Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018 will:

  • Establish a more stable and predictable equalisation standard, based on the fiscal capacity of the stronger of New South Wales or Victoria;
  • Introduce a GST relativity floor, initially set at 70 cents and ratcheting up to 75 cents in 2024-25;
  • Permanently boost the GST pool with direct Commonwealth cash injections; and
  • During the transition period between 2021-22 and 2026-27, states and territories will get the better of the old or the new system over the period, and the Productivity Commission will conduct an inquiry at the end of the transition period to assess whether the updated system is working efficiently and operating as intended.

Payments will be verified annually by the Commonwealth Grants Commission over the transition period and any adjustments made accordingly. The Government’s additional contribution to the GST pool will not be offset or partially offset by a decrease in other grant funding to the states.

Delivering a fairer and more sustainable GST distribution system is part of our plan for a stronger economy, helping to deliver the essential services Australians rely on.