The Liberal Government is delivering on its promise to fix problems in the system used to determine the share the revenue from the GST, leaving all states and territories better off.
This will be the first time real changes have been made to fix problems in how the GST is shared since the GST was introduced almost 20 years ago.
Federal Member for Moore, Ian Goodenough MP said “I’m extremely proud of the WA Members and Senators whose continuous campaigning on this issue has resulted in a long term fix that will ensure WA receives its fair share of GST revenue.”
“The current GST system has been a contentious issue in Western Australia for a long time and I’m pleased that the Liberal Government has been able to deliver a real long-term solution rather than a quick political fix.”
The transition will occur over the next eight years and reinforce and protect the ‘fair go’ system used to distribute the GST, called Horizontal Fiscal Equalisation or HFE, that supports the services all Australians rely on.
Our preferred model involves moving to a new benchmark that will ensure the fiscal capacity of all States and Territories is at least the equal of NSW or Victoria (whichever is higher). Benchmarking all States and Territories to the economies of the two largest states will remove the effects of extreme circumstances, like the mining boom, from Australia’s GST distribution system.
To assist with the transition to the new system, the Commonwealth would provide short-term funding over the three years from 2019-20 to 2021-22 to ensure that no State receives less than 70 cents per person per dollar of GST. WA is expected to be the only State with a relativity below 70 cents during this time.
“The top-up funding provided by the government can be used to deliver any essential service or infrastructure project that will benefit the state. It guarantees that we can provide WA schools, hospitals and infrastructure with additional funding to improve service delivery.” Mr Goodenough said.
In addition to moving to a new, more stable equalisation standard, the Government also proposes to commit to put in place a ‘floor’ on the relativity any State can receive. The Government will implement a floor of 70 cents per person, per dollar of GST, below which no State’s relativity can fall, from 2022-23, rising to 75 cents from 2025-25. Given the formula is now based on a more stable benchmark, it is highly unlikely relativities would move below the new floor.
No state will be financially disadvantaged as a result of moving to this new benchmark. A fair and sustainable transition to a new equalisation standard will be ensured, through an additional, direct and permanent Commonwealth boost to the pool of funds to be distributed among the states.