GST Changes

This week, in the biggest changes to GST allocations since the tax was introduced in 2000, the Government announced changes to the method for distributing GST address deficiencies in the current allocation methodology.

State and Territories will now be brought into line with the financial performance of either NSW or Victoria (whichever is higher), rather than the strongest-performing jurisdiction under the current system, evening out the impact of extreme events such as mining booms.

Thanks to an overall increase in the funding that will be distributed, all jurisdictions will be better off. No state or territory would receive less than 70 cents for every dollar of GST revenue collected from 2022/23, rising to 75 cents from 2024/25.

WA would receive the largest increase of $3.3 billion by 2026/27, with the ACT getting the smallest boost of $46 million.

The Treasurer, the Hon Scott Morrison MP, explained the changes as:

Well, it’s all about having a bigger pie. At the end of the day, what the Commonwealth will be doing is making sure that after we’ve collected all the GST revenue we’ll add a bit more to that each year and that means that there is more to share around all the States and Territories, which will mean more hospitals, schools, police, and essential infrastructure.

The Shadow Treasurer, the Hon Chris Bowen MP criticised the Government taking too long to act and questioned where the funds for the top up payments would come from stating:

The Government’s proposed model relies on $7.2 billion in additional top up payments over the next decade. This comes on the back of the Government’s expensive and unfair $144 billion in income tax cuts on the never never and giving $17 billion to the banks. Where is the money coming from?

Independent Member for Denison, Mr Andrew Wilkie MP, treate d the announcement with scepticism stating:

Frankly we shouldn’t be rushing to please Western Australia because the state did very well out of the GST in the early days and squandered the rivers of gold it collected during the mining boom.