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Federal Government to fund states' and territories' transition to proposed GST revenue plan





Treasurer Scott Morrison has promised no Australian state or territory will be worse off under a major overhaul of how GST funds are distributed.

To ensure no-one loses, the Federal Government will hand over $9 billion in "top up" funding during the transition to a new formula.

The new model follows a year-long review by the Productivity Commission, but the Treasurer has rejected the major recommendation that was made.

Mr Morrison said the recommendation would have benefited NSW and Western Australia, but left small states behind.

Releasing the Productivity Commission report and the government's interim response, which he described as "the fair go principle", Mr Morrison said "the system is broken, it does need to be fixed".

"The issue has been kicked down the road in the past," he told reporters today.

"That has to end. Australia does it better than anywhere else and we're going to do it better. To ensure the essential services that all Australians rely on.

"You've got to make the pie bigger. If the pie's bigger everyone gets more. All the states and territories benefit."
It's the biggest change to the GST since it was introduced in 2000 and comes after years of bitter feuding over the fairness of funding.

The new design will set a "floor" of 70 cents per person, per dollar of GST to make sure no state receives less than 70 percent of their own revenue from 2022-23, and 75 cents from 2024-25.

To help in the transition, Canberra will chip in $7.2 billion from 2021-22 to 2028-29.

By then, the Commonwealth will be contributing more than $1 billion a year in untied funds.
"When (the states and territories are) better off, that is a guarantee for essential services," Mr Morrison said today.

"We do believe in a fair go and a fair go has to be for everyone. The system wasn't providing a fair go for everyone."

In response, Opposition leader Bill Shorten said "the devil's in the detail".

"Liberals and the GST... It's always something you've got to be careful about," he said.
In response, Opposition leader Bill Shorten questioned the plan, saying he wants to make sure the proposed changes isn't 'robbing Peter to pay Paul'.

"If they're not trying to change the distribution, they're trying to increase the GST.

"I want to make sure this isn't a government that's robbing Peter to pay Paul."

On the contrary, Mr Morrison said no tax would rise to fund the new arrangement, but that the cost would be absorbed by the budget.

From 2026-27, the formula will be changed so only NSW and Victoria - the fiscally strongest states - will be used as the benchmark for funding.

The formula will have to be approved by the states and territories at a meeting in September.

Mr Morison said the figures were "indicative" and the final details would be thrashed out at the meeting with Treasurers.

But, he said, the government wasn't considering broadening the base, or lifting the rate of the GST.

The Federal Government believes the changes will satisfy the states, particularly WA, which has missed out on funding since the end of the mining boom.
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