GST carve-up changes reach parliament

Treasurer Josh Frydenberg has introduced laws which would change the way GST revenue is distributed to the states and territories.

Laws to overhaul the way GST revenue is carved up among the states and territories have been introduced to federal parliament.

The laws were triggered by Western Australia recently receiving just 30 cents in the dollar, while other states and territories with far smaller populations received more.

The new standard for the distribution of the tax revenue will be the fiscal capacity of the stronger of New South Wales or Victoria.

As well, a GST floor of 75 cents will be introduced and the GST pool will be boosted with federal money.

Treasurer Josh Frydenberg says the integrity of the GST had been threatened when WA’s share dropped, after the mining boom brought “unprecedented shock to the system”.

“The GST provides an important source of revenue to the states and territories, however the viability of the system is only as good as the formula that underpins it,” he told the lower house.

The government says the change will deliver an additional $9 billion in extra untied funding to the states and territories over 10 years and from 2026-27 an additional $1 billion each year in perpetuity.

Labor signalled it would back the laws when the government announced a guarantee every state and territory will be better off.

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.


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