Victoria has lashed out at new rules for carving up the GST, accusing the Morrison government of siphoning billions of dollars from the east to the benefit of Western Australia in a bid to woo Australia’s richest state.
Eastern states including Victoria, South Australia and Tasmania are furious about a new system for distributing more than $70 billion worth of GST revenue, claiming it unfairly favours the mining-rich state of WA.
In a submission to a Victorian Parliamentary inquiry, State Treasury warns Victoria alone stands to lose up to $1.2 billion a year by 2027-28 once a transitional “no-worse-off” guarantee by the federal government ends.
“The no-worse-off guarantee is currently legislated only until 2026-27, after which many states, including Victoria, face the risk of an entrenched and ongoing loss of GST revenue,” the submissions says.
After repeated complaints from WA, the Coalition announced new rules for dividing up the GST pool in 2018.
Previously the Grants Commission handed out the GST with the aim of giving each state the same ability to deliver basic services and infrastructure as the “financially strongest state”.
The GST is distributed to the states on a per capita basis to help equalise access to services and infrastructure. Under the old system, states that couldn’t raise as much state revenue received more GST per person.
Western Australia typically got a much smaller share of the GST carve up because it receives billions of dollars in mining royalties. This financial year, for example, Western Australia is getting about 42 cents back for every $1 of GST revenue it contributes, compared to 96 cents in NSW, 92 cents in Victoria, $1.35 in South Australia and $1.06 in Queensland.
Under the overhaul, agreed to in the run-up to the 2019 federal election, WA will be paid the same per person as either Victoria or NSW, which is financially stronger.