Report Says GST Plan is Costly and Unfair

The government has been given options to change its GST deal.

In short:

The Productivity Commission says the GST deal is a mistake and should be stopped.

The commission has given the government other options to help Western Australia.

What's next?

The final report will come out in December.

A review found the GST deal with Western Australia is costly and unfair.

The government should change the deal or find a better way to help Western Australia.

The deal gives Western Australia more GST money than it would get normally.

The commission found this deal cost the government $23 billion in six years.

The deal also makes inequality between states worse.

Prime Minister Anthony Albanese said Western Australia will get its fair share of GST.

Other states and territories are happy with the report because they don't like the deal.

New South Wales Treasurer Daniel Mookhey said the deal was a failure.

He thinks Australians should get the same support no matter where they live.

Daniel Mookhey said the report is historic.

Queensland Treasurer David Janetzki said the current system is unfair.

He thinks the system leads to bad outcomes and the government should change it.

South Australian Treasurer Tom Koutsantonis said the GST deal is bad.

He thinks Western Australia should not have an unfair advantage over other states.

Victorian Treasurer Colin Brooks said the report agrees with what Victoria has been saying.

How the GST carve-up works

The Goods and Services Tax is split among states and territories based on their needs.

The money is split based on how much each state needs and how much money it can make.

The release of the GST split causes arguments among state treasurers.

A formula decides how much money each state gets based on its population's needs.

The idea is that all Australians should get the same level of government services.

Each state gets a score based on its needs and means, which decides how much GST it gets.

The formula has always been controversial, especially in Western Australia.

Western Australia has argued that the formula punishes it for doing well economically.

The state thinks the formula does not support national economic growth.

How the WA GST deal works

In 2018, a floor was put on the relativity score to help Western Australia.

Western Australia gets extra money from taxpayers because of its special GST deal.

Only Western Australia has benefited from this deal, getting $22 billion more.

The deal means other states and territories lose money, so they get top-up payments.

The no-worse-off guarantee was extended to 2029 to help other states.

What the Productivity Commission has found

The commission thinks the GST formula can be changed to make it fairer.

The commission recommends scrapping the current deal and going back to the old system.

But it also gave the government two other options to consider.

One option is to make direct payments to states that are unfairly penalized.

This would mean Western Australia gets more money, but not at the expense of other states.

The commission thinks the current system is unfair and leads to bad outcomes.

The benchmark means Western Australia can get more GST when other states have problems.

The GST system now has two sets of rules, which is unfair.

If a state improves its economy, it should not get less GST money.

The commission thinks the current system costs other states $47 billion.

Only Western Australia has benefited from the changes at the expense of the government.

The commission's other option is to fix the floor at 0.75 and not tie it to other states.

The system should ensure all states can offer similar services and infrastructure.

The commission's report was scheduled as part of the initial WA GST deal.

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