Federal-state financial relations - GST transitionary assistance to expire


Budget Review 2009-10 Index

Budget 2009 10: Federal-state financial relations

GST transitionary assistance to expire

Richard Webb

Under existing arrangements for the payment of GST revenue to the states, it is possible that some states will be worse off than if the pre-GST arrangements had continued to apply.

When the Howard Government introduced the GST, it pledged that no state would be worse off under the new arrangements compared with the former arrangements. The pledge was that if a state’s GST entitlement was less than the amount it would have received under the former arrangements—the guaranteed minimum amount—the Federal government would top up that state’s GST entitlement with budget balancing assistance. This pledge was initially due to expire on 30 June 2006. The Howard Government subsequently extended this transitional period to 30 June 2009.

The strong growth in GST revenue meant that for the period 2004–05 to 2007–08, the Federal government did not have to pay any budget balancing assistance. However, Budget Paper No. 3 indicates that the Federal government will have to pay budget balancing assistance of $261 million in 2008–09.[1] But with the pledge to provide budget balancing assistance due to expire on 30 June 2009 and the future level of GST payments uncertain, some states might receive less GST than their guaranteed minimum amounts in 2009–10 and beyond. Some states could therefore be worse off than if the pre-GST arrangements had continued to apply.   



[1].    Australian Government, Australia’s federal relations: budget paper no. 3: 2009–10, Commonwealth of Australia, Canberra, 2009, p. 116.


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