Every state and territory will be better off under new laws passed by Parliament today that will deliver a fairer and more sustainable distribution of the Goods and Services Tax (GST).
Under our reforms to the GST, an additional $9 billion in extra untied funding will be delivered to the states and territories over 10 years and an additional $1 billion in perpetuity once fully implemented.
The former GST distribution system was not working as intended, with Western Australia recently receiving just 30 cents in the dollar, while other states and territories with far smaller populations received more.
This was not only unfair and unsustainable, but it threatened 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 that was passed by the Senate today 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, effectively 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 and Territories.
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.