The Commonwealth Grants Commission is recommending all states except Queensland to receive more GST in 2024–25 in a move the Queensland Government is calling “shonky”.
Based on the commission’s recommendations, Queensland’s GST distribution is expected to fall by $1.2 billion compared with 2024–25 to $16.6 billion.
“This is primarily due to significant growth in its capacity to earn coal royalties, both from higher coal prices and from an increase in the average national coal royalty rate. Queensland has the largest share of production of high value coal. Changes to the assessment of state COVID-19 expenses also reduced Queensland’s expected GST distribution given its below-average expenses in this area,” the commission reports.
Fellow mining state Western Australia continues to benefit from the 2018 legislative changes to the GST distribution arrangements, which introduced a GST relativity floor of $0.75. Western Australia is estimated to receive almost $6 billion more in GST payments in 2025–26 than it would have received under the previous arrangements.
All other states will continue to receive “no worse off payments”.
Victoria’s GST distribution will increase by $3.7 billion from 2024 to $26.1 billion.
“The absence of a significant coal industry in Victoria resulted in it having a lower capacity to raise mining royalties compared with the major coal-producing states,” according to the grants commission.
A rebound in population growth in Melbourne following the pandemic also increased Victoria’s relative need for infrastructure spending. Additionally, changes to the assessment of state COVID-19 expenses increased Victoria’s expected GST distribution given its expenses in these areas were above the average of all states.
State of dismay
Unsurprisingly, the Queensland Government has called on the Commonwealth to reject a new proposal to redistribute more than $5 billion in GST revenue from the state to Victoria and New South Wales.
Queensland Treasurer David Janetzki says the federal government must act in the state’s best interest and dismiss the “alarming proposal”.
“This recommendation would severely compromise Queensland’s capacity to deliver essential services and infrastructure for our growing state,” he says.
“This must be called out for what it is, shonky shifting of Queenslanders’ money for a better payout for New South Wales and Victoria. Queensland deserves better than this callous carve-up, which will leave Queensland missing out.
“The outcome of this review is based on disputed methodology, with Queensland left to foot the bill for the failures of New South Wales and Victoria during COVID-19.”
Janetzki says it would be the biggest redistribution in the history of the GST and Queensland Treasury estimates the impact would be a reduction in the state’s GST share of $5.3 billion over three years.
If the proposal is adopted, he says Queensland will be the only state to lose GST revenue from 1 July, while the share of revenue going to Victoria and New South Wales will increase by $4 billion and $1.3 billion respectively in the next year alone.
Preferred state of play
However, the Chamber of Commerce and Industry WA (CCIWA) says the release of the Commonwealth Grant Commission’s GST Relativities for 2025-26 show Western Australia still receives the lowest share of GST per capita in the country.
CCIWA Chief Economist Aaron Morey says WA continues to subsidise weaker economies with its guaranteed floor of $0.75 per dollar collected of GST.
Morey notes that Victoria’s share is set to increase from $0.96 to $1.07 per dollar of GST, at the expense of revenue flows to Queensland and New South Wales.
“The reforms in 2018 thankfully softened the blow and we now have a system that is somewhat fairer, but the fact remains WA still gets the smallest return in the nation on every dollar of GST revenue we create,” he adds.
“States like Victoria should be focusing on developing their own economies like WA has done.”
Morey says that it is in the nation’s interest to retain the 2018 reforms as the GST system prior to 2018 disincentivised states from further developing their own economies.
The Commonwealth Grants Commission provides independent advice to the Australian Government on how GST should be distributed among the states. The commission takes into account the states’ different abilities to raise revenue and their different costs in providing services.
According to the commission, the amount of revenue each state can raise differs because it depends on things like the value of mining production, property transactions and taxable payrolls. The cost of providing services varies too, based on things like a state’s size, its geography, where its residents live and other socio-demographic characteristics, for example, age, health, income, and education.
“Changes to the GST distribution in 2025–26 reflect the 2018 GST distribution legislation. These include implementation of a GST relativity floor below which no state’s GST revenue sharing relativity can fall and Commonwealth top-ups to the GST pool. The Commonwealth also makes separate transitional no worse off payments to the states,” the grants commission notes.
Write to Adam Orlando at Mining.com.au
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