Western Australia will receive $6.2bn more GST this year as a result of a Turnbull-government era deal backed by Labor, triggering $5.2bn in payments to other states to ensure they are no worse off.
Those are the recommendations of the Commonwealth Grants Commission (CGC), which on Tuesday released its latest report on the carve-up of GST between the states and territories.
Decisions of the independent commission are applied by the federal government as a matter of course, despite protests from states losing GST, which this year includes New South Wales and Queensland.
Victoria’s GST revenue will soar by $3.7bn compared with 2023-24, which the commission explained was “largely driven by its reduced capacity to raise mining revenue” and increased urban population and density.
Due to the GST floor, introduced by the Turnbull government, states are guaranteed to receive 75% of the goods and services tax paid in their state, up from 70% last year.
According to the Commonwealth Grants Commission, this will see Western Australia’s GST distribution rise by $6.2bn relative to what it “would have under the previous GST distribution arrangements”. That was despite WA having “a very strong fiscal capacity, driven by its capacity to raise iron ore royalties”.
The report said the deal “lowers the GST relativities of the other states” but the commonwealth’s “top-up to the GST pool and no worse off payments ameliorate this impact”. Top-up payments will total $5.2bn this year, up from $4.8bn last year.
In February, Anthony Albanese recommitted to the GST deal, despite warnings that it will cost the commonwealth $50bn over a decade. The formula set by Turnbull’s government also guaranteed no state would be worse off under the deal until 2026 – an arrangement extended by the Albanese government to 2030.
The report said the Northern Territory is “estimated to receive the largest increase in per capita terms ($995 per capita)”.
The GST pool is estimated to grow from around $85bn in 2023–24 to around $89bn in 2024–25.
All states and territories received more GST than last year, except for Queensland, which will receive $469m less and NSW, which will receive $310m less.
The Grants Commission explained that their distributions “are estimated to fall, largely due to an increase in their relative revenue raising capacities”, particularly due to coal royalties and soaring land values.
GST needs were reduced by “above-average growth” in land tax capacity in NSW and Tasmania, and in property sales in Queensland, Western Australia and the ACT.
The Victorian premier, Jacinta Allan, welcomed the raise in her state’s revenue.
“We are pleased that the Commonwealth Grants Commission has recognised previous inequity in the GST allocation and that Victoria is receiving a much fairer share,” she told reporters in Geelong.
“There is still more work to be done when it comes to GST, which is why we will continue to push for the no worse off guarantee to be made permanent by the commonwealth government. It’s not fair that Victorians are subsidising other states.”
But the NSW government argued that the state’s GST share falling from 92.4 cents each dollar raised to 86.7 cents is the largest single year reduction since the GST was introduced in 2000 and amounts to being $1.65bn worse off.
The NSW treasurer, Daniel Mookhey, said the results show “how out of touch the Commonwealth Grants Commission is”.
“NSW takes most of the nation’s population growth, but is being punished by having its GST cut,” he said in a statement. “It is an absurd process in dire need of reform.”
The NSW appears to be preparing the ground for a budget deficit, with the finance minister, Courtney Houssos, noting “we have been honest with the people of NSW about the challenges our budget is facing since we were first sworn in”.
