Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018


Bills Digest No. 42, 2018–19

PDF version [766KB]

Adrian Makeham-Kirchner
Economics Section
12 November 2018

Contents

Purpose of the Bill
Structure of the Bill
Background
Committee consideration
Policy position of parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key provisions and issues
Other provisions
Concluding comments
Appendix A: matters not addressed in the Bill

 

Date introduced:  18 October 2018
House:  House of Representatives
Portfolio:  Treasury
Commencement: Clauses 1 to 4 commence on Royal Assent. Schedule 1 commences on the day after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at November 2018.

Purpose of the Bill

The purpose of the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018 (the Bill) is to amend the Commonwealth Grants Commission Act 1973 (the CGC Act) and Federal Financial Relations Act 2009 (the FFR Act) to change the nature of untied payments made by the Commonwealth to states and territories (the states) from goods and services tax (GST) revenues. These proposed changes will:

  • implement an updated fiscal equalisation standard, from ‘full equalisation’ to ‘reasonable equalisation’
  • provide transitional arrangements between the current and updated equalisation systems
  • introduce a GST revenue sharing relativity floor
  • create a GST revenue pool top-up and
  • define additional financial assistance to enable a ‘no state is worse off’ guarantee.

Structure of the Bill

The Bill includes four clauses and one Schedule.

The clauses are primarily machinery provisions but include one substantive clause that requires a review of the impact of implementation of the Bill.

Schedule 1 sets out:

  • amendments to the CGC Act to create new obligations on the responsible Minister in setting terms of reference for the Commonwealth Grants Commission (CGC). In particular it implements a new definition of horizontal fiscal equalisation (HFE) and
  • amendments to the FFR Act that define a new adjusted GST pool, a transitional funding model for all states, the introduction of a relativity floor and mathematical representations of future adjusted pool indexation.

Background

The financial relationship between the Commonwealth and the state and territory (the states) governments has been established under a number of constructs since Federation. The relationship is constantly evolving. There are significant complexities in the relationship that are beyond the scope of this Digest. For practical purposes this Digest considers federal financial relations since the introduction of the Goods and Services Tax (GST). Particular focus is given to the debates and evidence generated between 2012—when the current system was reviewed in detail for the first time since 2000—and the introduction of the Bill.

Federal financial relations

The Australian Constitution allows that ‘the Parliament may grant financial assistance to any State and on such terms and conditions as the Parliament thinks fit’ (section 96).

Since 2000, financial assistance from the Commonwealth to the states has been made in two ways:

  • general revenue assistance: payments that are made without obligations on the states, which can be used for any purpose. This includes the transfer of the GST receipts and compensation for matters usually outside the control of the state and
  • payments for a specific purpose: payments from the Commonwealth to or through states for a purpose agreed with the recipient through a body like the Council of Australian Governments (COAG) or a COAG council.

The purpose of these payments is to reduce a vertical fiscal imbalance (VFI) that arises from the Commonwealth having relatively more revenue raising power compared to the states, while comparatively fewer expenditure requirements.

Total payments in 2018–19 are estimated to be $126.751 billion, of which $68.196 billion is general revenue assistance and $58.554 billion is payments for specific purposes.[1] The GST component of the general revenue assistance is $67.320 billion.

The Bill deals only with the distribution of the GST entitlement or ‘pool’.

Distributing the GST pool

The distribution of the GST pool is governed by the FFR Act and the Intergovernmental Agreement on Federal Financial Relations (IGA FFR).

The FFR Act sets out the provision of ongoing support for the states including providing ‘general revenue assistance’, part of which is a ‘GST revenue grant’. This provision also provides for a range of payments for specific purposes (section 3).

The amount of GST provided to each state is referred to in the FFR Act as a ‘GST Revenue Grant’, which is calculated under section 5 as follows:

Subject to this Act, each State is entitled to the payment, by way of financial assistance, for a payment year, of a grant worked out using the formula:

Adjusted State population x GST revenue
Adjusted total population

where:

adjusted State population means the estimated population of the State on 31 December in the payment year (see section 7) multiplied by the GST revenue sharing relativity (see section 8) for the State for that year.

adjusted total population means the sum of the adjusted State populations of all of the States for the payment year.

GST revenue means the GST revenue for the payment year (see section 6).

The meaning of GST revenue, from which the GST pool is derived, is set out under section 6 of the FFR Act, and includes:

(3)[...] (a)    the amount that is the total of the following:

(i)       the GST that was collected;

(ii)     the payments made to the Commissioner of Taxation representing amounts of GST that would have been payable if the Constitution did not prevent tax from being imposed on property of any kind belonging to a State and section 5 of the GST Imposition Acts had not been enacted;[2]

(iii)    the additional GST that would have been collected if the Commonwealth and Commonwealth entities could be made subject to taxation by a Commonwealth law and section 177‑1 of the GST Act made those entities actually liable rather than notionally liable;[3] and

(b)       the amount of general interest charge that was collected to the extent that it is attributable to:

(i)       unpaid GST; or

(ii)      unpaid general interest charge payable in respect of unpaid GST; and

(c)     the amount, determined in a manner agreed by the Commonwealth and all of the States, that represents amounts of voluntary GST payments that should have, but have not, been paid by local government bodies.[4]

Under the FFR Act, the Commonwealth Treasurer ‘may determine’ the GST revenue sharing relativity (subsection 8(1)), and ‘must consult each of the States’ before making a determination (subsection 8(2)). In addition, the Act is clear that the Minister—the Treasurer—‘must have regard to’ the IGA FFR in making a determination (paragraph 21(a)).

The IGA FFR says that the ‘objective of the framework for federal financial relations is the improvement of the well-being of all Australians through... the equalisation of fiscal capacities between States and Territories’ (paragraph 5(f)) and that ‘the Commonwealth will distribute GST payments among the States and Territories in accordance with the principle of horizontal fiscal equalisation’ (clause 26).

Neither the current FFR Act nor IGA FFR define ‘horizontal fiscal equalisation’ or ‘fiscal capacity’.

The ‘GST revenue sharing relativity’ is set by a Determination made by the Commonwealth Treasurer under the FFR Act. The Determination is a legislative instrument, but is not disallowable (FFR Act section 8).

Calculating a relativity

The IGA FFR sets out, in Schedule D, that ‘[t]he Commonwealth Treasurer will determine the GST revenue sharing relativities, which embody per capita financial needs based on recommendations of the Commonwealth Grants Commission, after consulting with each State and Territory’ (paragraph D65).

The Commonwealth Grants Commission (CGC) is created and regulated by the CGC Act. Under that Act, the role of the CGC includes inquiring into and reporting to the Commonwealth Treasurer on:

  • ‘any application made by a State for the grant, under section 96 of the Constitution, of special assistance to the State’ (paragraph 16(a))
  • matters relating to a grant of assistance, or the making of a grant of assistance, under section 96 to a State, that are referred to the Commission by the Treasurer (paragraphs 16(b) and (c)).

GST relativities are not described in the CGC Act. Special assistance means ‘...the grant of financial assistance to a State for the purpose of making it possible for the State, by reasonable effort, to function at a standard not appreciably below the standards of other States’ (section 5).

To determine relativities the CGC undertakes modelling of each state’s revenue, expenditure, investment and net borrowing efforts to determine an ‘average’ level of effort, and then calculates the relative position of each state to that average before determining adjustments to bring each state to the same standard as a strongest state.

In addition to the CGC Act, the IGA FFR provides guidance on how the CGC should treat certain other payments from the Commonwealth in its recommendations to the Treasurer. Relevant to untied or ‘general revenue’ payments, the CGC is advised:

... general revenue assistance, excluding GST payments, will be treated by ‘inclusion’, recognising that these payments are available to provide untied general budget support to a State or Territory, however, the Commonwealth Grants Commission may treat, on a case by case basis, any component of general revenue assistance as ‘out of scope’ if it considers such treatment is more appropriate (IGA FFR, Schedule D—paragraph D66(c)).

The methodological approaches are updated annually, and reviewed in detail every five years, or as frequently as the Treasurer determines.[5] The modelling is used to inform recommendations to the Treasurer about the relativity that should be applied to each state.

The basis upon which the CGC has determined the relativities from the modelling has been Horizontal Fiscal Equalisation (HFE), which it has defined as:

State governments should receive funding from the pool of goods and services tax revenue such that, after allowing for material factors affecting revenues and expenditures, each would have the fiscal capacity to provide services and the associated infrastructure at the same standard, if each made the same effort to raise revenue from its own sources and operated at the same level of efficiency.[6]

While this version of HFE is not legislated or otherwise defined, it reflects a definition that has evolved since 1933. This version of the definition was first identified in the CGC 2004 review report on revenue sharing relativities.[7]

Institutional arrangements

The institutional arrangements for all aspects of managing the GST, questions arising in relation to the institutional arrangements, or amendments to payment arrangements are set out in the IGA FFR, in relation to the functions of the Standing Council on Federal Financial Relations (the Council, also referred to as the Council on Federal Financial Relations or CFFR). The Council includes the Commonwealth Treasurer and all state and territory Treasurers as members. The IGA FFR Schedule A states, relevantly for the Bill:

Schedule A—Institutional Arrangements

A4 The functions of the Standing Council include:

        (c) the oversight of the operation of the Goods and Services Tax (GST), including:

(i) approving changes to the GST base and rate;[8] 

(ii) maintaining a performance agreement with the Australian Taxation Office in respect of its efficient and cost-effective administration of the GST;

(iii) considering reports of the GST Administration Sub-Committee on-

(1) proposed changes to the GST base;

(2) the performance of the Australian Taxation Office in GST administration;

(3) other matters of operational significance;

(d) discussion of Commonwealth Grants Commission recommendations regarding GST revenue sharing relativities prior to the Commonwealth Treasurer making a determination;

(i) reviewing funding adequacy under this Agreement, not less than every five years, with an on-going role of monitoring the reporting of outcomes to identify issues that might trigger earlier consideration of funding adequacy and related outcomes

(j) considering on-going reform of federal financial relations.

A6 All questions arising in the Standing Council will be determined by unanimous agreement unless otherwise specified in this Agreement.

Reviews of the HFE system

Since the introduction of GST in 2000, the HFE system has been subject to regular methodological reviews, annual updates and several systematic reviews. Over the same time, there has been considerable stakeholder debate about the HFE system. This is considered elsewhere in this digest.

The most prominent systematic reviews include:

  • a review of Commonwealth-State Funding in 2002. Undertaken by Garnaut and FitzGerald, this review was commissioned by the governments of New South Wales, Victoria and Western Australia. Among other findings, the review recommended a move to a system where the GST was primarily distributed on an equal per capita (EPC) basis and interpersonal equity was targeted with Specific Purpose Payments.[9] No systemic changes occurred as a consequence of this review
  • a comprehensive GST Distribution Review between 2011 and 2012. This review was commissioned by Prime Minister Gillard, who is referenced as saying ‘...she believed the [GST] funding formula was not working and promised to make it fairer, simpler and more transparent,’ and that ‘...the current arrangements were too complex and unpredictable, leaving State and Territory budgets vulnerable to "shocks" when the GST carve-up changed from one year to the next’.[10] The review took submissions, undertook hearings, commissioned expert research, delivered two interim reports and a final report. Among a range of findings on federal financial relations, ‘a GST distribution model of EPC, plus Commonwealth-funded
    top-ups for fiscally weaker States, was contemplated’.[11] No systemic changes occurred as a consequence of this review
  • a reference in the 2014 National Commission of Audit report. The Towards Responsible Government: Phase One review recommended new arrangements to address HFE, while also recommending an approach to reducing the level of vertical fiscal imbalance.[12] The Commission of Audit recommended sharing all GST revenue on an equal per capita basis, with the Commonwealth providing an additional grant to current recipient states and territories to ensure that no state or territory is worse off compared with the existing equalisation process. In the model of the Commission of Audit, the CGC would determine the distribution of additional equalisation grants.[13] No systemic changes occurred as a consequence of this review and
  • the Reform of the Federation White Paper. In February 2015 the Commonwealth Government published an issues paper as part of the Federation White Paper process. The paper noted ‘recently, HFE has been brought into sharper focus as an increase in mining royalties in Western Australia has seen its share of GST funding fall to very low levels.’[14] This issues paper reported extensively on the findings and evidence generated through the 2012 review, and posed questions around the fairness of full equalisation, tolerable differences from full equalisation, the best approach for re-distributing resources within the federation, the treatment of grants in the HFE process, and whether the system created reform disincentives.[15] A final white paper on federalism was initially deferred for the term of the 45th Parliament,[16] and additional advice was provided that neither a green paper nor white paper would be proceeding.[17]

Over the period since 2000, the CGC also undertook three five-year methodological reviews, commenced a 2020 five-year review and delivered at least 19 annual update reviews.[18]

On 5 May 2017, the then Treasurer issued Terms of Reference to the Productivity Commission (PC) to undertake an inquiry into Australia’s system of HFE. The Treasurer required the PC to take into account the 2012 review. The review scope was wide ranging on a general theme:

The inquiry should consider the influence the current system has on productivity, efficiency and economic growth, including the movement of capital and labour across state borders; the incentives for the States to undertake fiscal (expense and revenue) reforms that improve the operation of their own jurisdictions, and on the States’ abilities to prepare and deliver annual budgets.[19]

The PC received submissions, undertook hearings, and produced a draft report and a final report. The final report— Inquiry Report into Horizontal Fiscal Equalisation (PC Review)—was completed in May 2018.[20] The report comprehensively details the current system of HFE, and makes several findings and recommendations to improve the system in line with the terms of reference.[21]

In July 2018, the then Treasurer tabled the PC Review. Concurrently, the Treasurer tabled a Government Interim Response (Interim Response) which set out the Government’s position on the PC findings and recommendations.[22] Unusually for HFE reviews, the Interim Response committed the Government to implement changes to the nature of the system of HFE. The changes flagged in the Interim Response are the genesis of changes implemented in this Bill. The changes were discussed by the Council on Federal Financial Relations on 3 October 2018,[23] and the Bill was introduced on 18 October 2018.

Committee consideration

Senate Economics Legislation Committee

The Bill was referred to the Senate Economics Legislation Committee (the Economics Committee) for inquiry on 18 October 2018. The Economics Committee reported on 8 November 2018.[24] Details of the inquiry are at the inquiry homepage.

The Economics Committee received 13 Submissions, primarily from the states.[25] They held one day of hearings, on 26 October 2018, with evidence being given by most of the submitters and the Commonwealth Treasury.[26]

The report canvassed the views of submitters, which are recorded in the ‘Position of major interest groups’ section later in this digest. Specific matters referred to by the Economics Committee included:

  • concerns about forecasts: submitters contend that forecasts used in future GST relativity scenarios are unreliable given the ten year duration[27]
  • ‘no worse off’ guarantee: submitters contend that the guarantee, as structured, is a cumulative guarantee which may not provide year-on-year certainty for state’s budgets.[28] The states would prefer an in-perpetuity guarantee, noting that the guarantee in the Bill effectively ceases in 2026–27
  • discretion offered to the Commonwealth Treasurer: submitters contended that the Bill provides too much discretion in what the Treasurer may consider in choosing which relativity outcome occurs (proposed subsection 5(3) of the FFR Act, at item 3 of Schedule 1 to the Bill)[29] and
  • review of the updated HFE system: submitters contended that the review of the outcomes of the Bill, to be conducted by the PC in 2026, may not have sufficient coverage or scope.[30]

Generally, the Economics Committee did not address these issues directly, and noted:

The committee acknowledges the concerns raised by the states and territories regarding the implementation of the updated HFE system but considers that the 'no worse off' guarantee provides a safety net during the transition period. Further, the legislated inclusion of a completed Productivity Commission inquiry by December 2026 gives all stakeholders an opportunity to reflect on the updated HFE system and argue for ongoing improvements following the transition period.[31]

The Committee recommended that the Bill be passed.[32]

Additional comments were made by Australian Labor Party (ALP) Senators, largely recasting the history of the debate from media sources, concluding with an observation:

Federal Labor has led the way in the GST debate. It is clear that Federal Labor's calls for a GST floor, for this floor to be legislated and that the 'no state worse off' guarantee be legislated have had a very material impact on the Government's actions and this legislation.[33]

The ALP Senators recommended ‘[t]hat the letter from the Federal Treasurer to the State and Territory Treasurers stating that 'any additional financial assistance referred to in the Bill will not be offset or partially offset by a decrease in other grant funding to the states' be tabled during the Parliamentary debate’.[34]

Senate Standing Committee for the Scrutiny of Bills

At the time of writing, the Senate Scrutiny of Bills Committee had not commented on the Bill.

Policy position of parties/independents

The position of political parties has shifted during different reviews and depending on the time within the review cycle. There is vast public commentary on the issues surrounding GST; this section aims to provide a reasonable snapshot of the most crucial views.

Liberal-National Coalition parties

Within months of becoming Minster for Finance, responding to issues raised by the then WA Premier about the impact of revenue sharing relativities on the WA GST share, Senator Mathias Cormann remarked: ‘...on behalf of all WA ministers...we have been very clear that we will not be making any changes to the GST in this term of Government and we will stick to that commitment’ and ‘beyond that we have also said that we would have a review into our tax system as well as into our Federation through two white paper processes and we encourage the WA State Government to submit its views through those reviews for consideration’.[35]

In the context of further agitation from the WA Government based on its HFE outcomes, in 2015 Senator Dean Smith made representations that the HFE system could be improved by fixing the relativities at the 2014–15 levels, and then:

... establish a floor below which a relativity for any state or territory would be prevented from falling. The precise level at which this floor should be set is secondary to agreeing the merits of the proposal. We should not delay improvement in the pursuit of perfection.[36]

A policy shift occurred in August 2016. The then Prime Minister outlined an approach to GST reform to be followed by a re-elected Coalition Government:

Over the next few years, the [GST sharing] formula will see Western Australia’s share more than double—considerably more than double from where it is at the moment to a much higher level.

We believe that we should take that opportunity— as the Western Australian share of the GST increases under the current system— to change the arrangements so that we set a percentage floor below which no state's receipts of GST can fall below.

Setting a floor below which a state’s share of the GST cannot fall, immediately after it has been exceeded in this cycle, means that no other state will be disadvantaged based on their projected GST shares.[37]

While this did not promise an immediate legislated floor or a no worse off guarantee, the floor concept has persisted in debates about GST reform since this time. The Prime Minister flagged a difficult political sell to ‘fix the GST’, and this was evident two days after the approach was announced, when Tasmanian Liberal Senators stated they were ‘...opposed to any changes to the GST distribution formula that would disadvantage Tasmania’.[38]

In the second reading stage of the Bill, Rick Wilson noted:

... we, the Western Australian members, met with the Prime Minister and the Treasurer in the then Prime Minister’s office, and we spoke about a way forward and the process to get come political agreement. That set off the Productivity Inquiry process.[39]

Australian Labor Party

Over an approximately similar time frame to the views of the Coalition, the position of the ALP has changed as well.

In 2015 it was reported that the Leader of the Opposition, Mr Shorten said ‘politicians “should not meddle” with the processes of the [Commonwealth Grants] commission’, and ‘a federal Labor government would not intervene to alter the distribution model of the goods and services tax’.[40]

Responding to the Prime Minister’s August 2016 statement, Mr Shorten was reported to have said ‘...he couldn’t take Turnbull’s idea seriously unless more detail was provided’ and ‘“Tell you what we’ll do about the GST–one, we’ll never increase it, unlike Mr Turnbull, and two–if he’s got a serious proposal to change the allocation, let’s see his detail”.. Mr Shorten also reportedly stated ‘I’m just not going to entertain Mr Turnbull’s thought bubbles, which are purely going by state politics in WA. Australia is getting fed up with Mr Turnbull’s all-talk, no-action approach to government’.[41]

In August 2017 Mr Shorten announced a new ALP policy a Fair Share for WA Fund. This policy committed an ALP Government to:

... invest $1.6 billion in a Fair Share for WA Fund – bringing Commonwealth funding for Western Australia up to the equivalent of a 70 cent floor...

The Fair Share for WA Fund will be enshrined in legislation and include a statutory obligation to invest all proceeds into Western Australian projects – creating jobs and boosting economic growth across the state...

This policy does not change the current GST formula.[42]

This promise did not outline an in-system relativity floor, rather an additional payment equivalent to a 70 cent GST floor.

Following the tabling of the PC Review and the Government’s Interim Response, the ALP announced a ‘unity ticket’ with the Coalition Government, noting:

What Labor will do is that we will support what the Government has said, but what we will also do is we will legislate it within our first hundred days. That's a floor of 70 cents, from 19/20 and we will lift that floor to 75 cents, 2024/25. We will also make sure that this funding is untied. Obviously, we will consult with the Western Australian Government and we'll have a view about things but this is going to be genuinely, a call for Western Australia.[43]

Second reading speeches from ALP members reflect this position.[44]

Minor parties and independents

There has been minimal commentary from the Australian Greens and independent members and senators. The consistent commentary has been in relation to protecting each jurisdiction’s individual GST share.[45]

Position of major interest groups

The states are the primary interest group affected by the Bill. The positions held by the different states has shifted during the several reviews and depending on the time within the review cycle.

Focussing only on the period covered by the Government’s Interim Response and the Bill, reflecting on the summary of states’ evidence provided in the Senate Standing Committee on Economics report, the key points are that WA ‘enthusiastically’ supports the changes proposed, while Tasmania, the NT, Victoria Queensland, ACT, NSW and SA support the existing system or an alternative system.[46]

Despite the disagreement about the approach, it appears that the ‘no worse off’ guarantee will provide some comfort for the states to work with the Commonwealth on implementing the changes. The governments of VIC, TAS, the ACT and NT made a case to the Senate Standing Committee on Economics that the guarantee should be extended ‘in perpetuity’, rather than expiring in 2026 as proposed in the Bill.[47]

At this stage, neither the Bill as tabled, nor broader changes to the IGA FFR, have been agreed through the Council on Federal Financial Relations.

Financial implications

Over the period from 2018–19 to 2021–22 the Explanatory Memorandum outlines a total expenditure of $2,373 million on the Government’s Interim Response. This is summarised in
Table 1.

Table 1: financial impact forward estimates

2018–19 2019–20 2020–21 2021–22
— -$883m -$585m -$905m

Explanatory Memorandum, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, p. 4.

The Bill will have an enduring effect on federal financial relations beyond the period in Table 1. The Explanatory Memorandum notes that ‘the Australian Government announced it would contribute additional funding to support the States and Territories to transition to the new benchmark—in total, nearly $9 billion over ten years’, which includes a combination of short term transition payments and the longer term boost to the GST pool.[48]

No additional funding is identified for the CGC to implement changes proposed by the Bill or other accepted recommendations which may impact upon the CGC’s operations.

Special appropriations

The Bill does not introduce a new special appropriation.

However, payments to the states, both existing and proposed through the Bill, are a special appropriation created under section 22 of the FFR Act.

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[49]

Parliamentary Joint Committee on Human Rights

At the time of writing, the Parliamentary Joint Committee on Human Rights had not reported on the Bill.

Key provisions and issues

Clauses 1-3

Clauses 1 to 3 are machinery provisions. These provide the short title, commencement provisions and the effect of schedules to the Bill.

Clause 4

Clause 4 requires the Productivity Minister[50] to refer the operation of the Bill to the Productivity Commission for inquiry, including:

(a)   whether the amendments made by the Bill are operating efficiently, effectively and as intended; and

(b)   the fiscal implications for each State, the Australian Capital Territory and the Northern Territory, of the amendments made by the Bill.

Subclause 4(2) requires the Productivity Minister to set 31 December 2026 as the reporting date for the inquiry.

Submissions to the Senate Economics Legislation Commission argue that the reference is problematic. Specifically:

  • the Victorian Government is concerned that ‘intent’, ‘efficiency’ and ‘effectiveness’ are not defined. It was joined by the NSW Government in its concern about how many recommendations would be acted upon[51]
  • the NT Government argues the Productivity Minister should wave the 25 sitting day timeframe for tabling inquiry reports established under section 12 of the Productivity Commission Act 1998, in favour of immediately providing copies to the states. Queensland argued similarly, except that it says the report should be immediately forwarded to the Council on Federal Financial Relations (CFFR)[52]
  • Tasmania argues against the PC undertaking the review, in favour of the CGC[53]
  • the NT, Victoria, Queensland, and ACT governments argue that the terms of reference for the inquiry should be developed in cooperation with the states.[54]

Schedule 1

Schedule 1 of the Bill contains the substantive amendments to the CGC Act and the FFR Act.

These amendments:

  • create an updated HFE system
  • provide for transitional arrangements between the current and the updated HFE systems
  • introduce a GST revenue sharing relativity floor
  • create a GST revenue pool top-up and
  • define the value of additional financial assistance for payments during the transition period.

These are considered in terms of the overall proposed changes. A consistent problem with identifying issues with this Bill is that the amendments introduced are inconsistent with the review report from the PC, meaning evidence from that review cannot be relied upon to assess the impact of the Bill.

Model of HFE

Amendments to the CGC Act define a change in HFE standard from full equalisation to reasonable equalisation, consistent with the Government’s position outlined in its Interim Response to the PC Review.

Item 1 proposes inserting a new section 16AB ‘Inquiries relating to GST revenue grants’ in the CGC Act. This section will:

  • apply to references made to the CGC by the Treasurer, to determine revenue sharing relativities from 2020–21 onwards (proposed subsection 16AB(1))
  • introduce a new standard for reasonable fiscal equalisation that ‘the States, the Australian Capital Territory and the Northern Territory each have the fiscal capacity to provide services (including associated infrastructure) at a standard that is at least as high as the standard for whichever of New South Wales and Victoria has the higher standard’ (proposed subsection 16AB(2)) and
  • require the Treasurer to frame the terms of reference to the CGC so as to require the CGC to make necessary adjustments to its methods to make an appropriate and even transition to the revenue sharing relativities generated under the reasonable equalisation approach over a five year period, increasing the ‘proportion of the relativities derived from the new arrangement’ in one-sixth increments commencing in 2021–22 under proposed subsection 16AB(3)).

The model of equalising states to a standard equivalent to New South Wales or Victoria adopted in the Bill was not considered by the PC in its review.

The closest model in the PC Report was ‘equalising to the second strongest state’.[55] The PC did not recommend this approach, instead preferring ‘equalising to an average of all states’, noting the second strongest state approach ‘...provides limited potential efficiency benefits, as it only substantially reduces disincentives for the fiscally strongest state’, and has the potential for ‘...equalisation to be driven by fiscal outliers should the strongest and second strongest states attain a significantly stronger fiscal capacity than all remaining states.’[56]

The Government Interim Response rejects the PC recommendation, noting ‘benchmarking all States to the economies of the two largest States would remove the effects of extreme circumstance, like the mining boom, from Australia’s GST distribution system’,[57] while not introducing counterfactual evidence to the PC evidence.

Defining NSW and Victoria in the legislation does not allow for the potential of another state becoming relatively stronger over time. For example, over the 19 years between 2000–01 and 2018–19 WA has been the strongest state (recording the lowest relativity) in 11 years and Queensland has been the second strongest in two years.[58] Under the NSW and Victoria definition, a stronger Queensland would receive windfalls like WA if it attained second strongest or strongest state relativities again in the future.

Fiscal capacity is not a defined term in the CGC Act, the FFR Act or the IGA FFR.

A relativity floor

Section 8 of the FFR Act outlines the determination of GST revenue sharing relativities. Item 4 proposes to insert subsections 8(2A) and 8(2B) in the FFR Act to create a GST revenue sharing relativity floor.

Subsection 8(2A) sets a floor of 0.7 for the 2022–23 and 2023–24 payment years. Subsection 8(2B) sets a floor of 0.75 for the payment years from 2024–25 or later. The Explanatory Memorandum notes:

... a GST relativity floor would provide an additional safety net to guard against the unlikely event of an economic shock that is extreme enough to introduce significant volatility into the horizontal fiscal equalisation system, even under a new equalisation standard.[59]

This language replicates precisely the statement made in the Interim Response.[60]

A key issue for the floor is that no evidence-based review of the HFE system has concluded that introducing a relativity floor in the GST system is an optimal approach.

The PC analysed a GST floor during its review. It noted a number of issues with a floor, including:

  • ‘...a relativity floor would represent less than full equalisation...’
  • ‘a further downside of such a proposal...is the increased complexity and unpredictability it could introduce’
  • funding the floor by increasing the GST pool ‘...would likely have negative implications for transparency and accountability’
  • ‘...the introduction of a relativity floor is unlikely to fix the policy disincentives and complexity concerns identified...’
  • ‘...a floor would be blunt and arbitrary and would benefit one State for the foreseeable future’ and
  • ‘...adding a floor today creates a variant to the system that can be further varied—with inevitable pressure for funding beyond the GST pool’.[61]

Finding 8.3 states:

The introduction of a relativity floor would blunt the equalisation task and introduce greater incentives for policy effort for the beneficiary State(s) — Western Australia for the foreseeable future. But a floor represents a band-aid solution, as it is not well targeted to broader efficiency and fairness problems.[62]

Apart from WA, most states did not favour the introduction of a GST floor.[63]

Similarly, the panel for the 2012 GST Distribution Review noted in its interim report:

While the Panel sees merit in exploring approaches that lead to increased predictability and stability in the distribution of GST revenue, it considers that there is no compelling case for adopting a floor at present. Moreover, a relativity floor of 0.75 would cause a major disparity in the fiscal positions of the States in the very near future.[64]

Further, they observed that ‘there has been no evidentiary basis or logically probative argument put forward to support that particular number [0.75]’.[65]

In 2011, the Australian Treasury did not support the concept of a relativity floor. In a submission to the 2012 Review Treasury noted that the ‘application of a relativity floor would reduce simplicity because no categories would be removed, but additional calculations would need to be applied in order to implement the relativity floor’[66] and:

... some options, such as imposing a relativity floor, are expected to reduce overall predictability. Although States breaching the floor would benefit from increased predictability, this would be outweighed by reduced predictability for States unaffected by the floor. States unaffected by the floor will have to account for the general assessment as well as the additional redistribution brought about by the floor.[67]

The implementation of a floor has been tested in the House of Representatives. In 2011, Tony Crook moved, inter alia:

That this House:

calls on the Government to amend the [FFR Act] to stipulate a minimum GST revenue-sharing relativity of 75 per cent, which would allow continuing respect for the principles of HFE, but with proper recognition for population, and without Western Australia being unfairly penalised for its disproportionate contribution to our national economic prosperity.[68]

After some debate, and attempts to amend the motion, the approach was not approved on a division vote, receiving just two ‘ayes’ on 24 November 2011.[69]

These observations were made under an assumption of a zero-sum GST pool, where any change in payments to one state axiomatically changes payments to other states. Despite adding no counterfactual evidence of the impact of the proposed floor in the Interim Response or the Explanatory Memorandum, the Bill allows for pool growth which removes the zero-sum distributional impact of a fixed GST pool.

The GST pool and ‘no worse off’ guarantee

Item 3 proposes replacing section 5 of the FFR Act, relating to the GST revenue grants. The effect of this change will be to incorporate a GST pool top-up into the grant determination formula:

Adjusted State population x (GST revenue + Pool top-up)
Adjusted total population

Item 5 proposes adding a new section 8A into the FFR Act, to define the pool top-up. The pool top-up is staged across payment years, including a base top-up and an indexation amount. The staging of the base top up is $0 in 2020–21; $600 million in 2021–22, 2022–23 and 2023–24, and $850 million in 2024–25 and 2025–26.

Proposed subsections 8A(2) and 8A(3) define a first indexation amount to apply in each of the years 2022–23 to 2025–26 inclusive. Proposed subsections 8A(4) and 8A(5) define a second indexation amount to apply in the year 2025–26. Substantively, subsection 8A(3) increases the $600 million base top up by a growth factor equivalent to growth in GST revenue since 2021–22. Similarly, subsection 8A(5) increases the additional $250 million base top up by a growth factor equivalent to growth in GST revenue since 2024–25.

The effect of the proposed paragraphs 8A(2)(a)-(c) and 8A(4)(a)-(c) is to guarantee that an indexation amount cannot be less than $0.

The pool top-up occurs beyond the current forecast horizon. The Explanatory Memorandum advises that the arrangements will ‘...increase the size of the untied GST distribution pool by a total of $7.2 billion from 2021–22 to 2028–29’.[70] This is inconsistent with the ideal transitional path identified by the PC. In the Review the PC noted:

... the transition path should be fiscally sustainable for both the States and the Commonwealth Government. The most sustainable approach (given the current fiscal position of the Commonwealth Government) is for the transition to be funded through the GST pool, rather than from sources outside the pool, such as other Commonwealth payments.[71]

To achieve a ‘no worse off’ guarantee, proposed subsection 5(3) of the FFR Act entitles states to whichever is higher from the outcome of a determination that would have been made under the current HFE system (‘...if the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Act 2018 had not been passed’) and the updated system including the pool top-up. The Explanatory Memorandum notes this is a cumulative entitlements guarantee.[72] The states have challenged the value of the guarantee, noting the potential for a year-on-year reduction in grants if there is no net loss in a cumulative sense.[73] The cumulative nature of the guarantee complicates the interpretation of this subsection, and Treasury has confirmed:

... the transition period actually does operate on a year-on-year basis, but it's a cumulative year-on-year basis. I'm not sure that was clear in all of the evidence that was given. If, in a scenario, a state did trigger a no-worse-off provision, they would get additional money in that year.[74]

A key issue for the guarantee is the source of additional GST pool revenue. Collectively, the states through the Board of Treasurers, have sought to ‘...ensure the source of top-up funding to meet the GST guarantee will not diminish other sources of grant revenue’.[75] The Explanatory Memorandum notes the pool top-up ‘...will be sourced from Commonwealth revenues not related to the GST’.[76] When asked ‘how do you respond to state and territory concerns that the Commonwealth funding arrangements for GST changes will be funded by cuts to other state and territory funding arrangements?’, the Treasury provided evidence that ‘the government has taken a policy decision that that won't be the case, and that's been communicated formally, in writing, to the states and territories’.[77] Treasury also noted that the $2,373 million identified under the fiscal impact section will ‘...be offset through the [2018-19] MYEFO [Mid-Year Economic and Fiscal Outlook] process’.[78]

Item 7 confirms that the proposed amendments to the FFR Act apply in relation to the 2021–22 payment year and later payment years. Any activity in the federal financial relations system from 2018–19 to 2019–20 will be achieved through different instruments.

The option of increasing the GST pool with other Commonwealth revenue was not considered by the PC in its Review, or in the earlier 2012 review. It is unclear what evidence exists that states collectively require an aggregate increase in united grants sourced from outside the GST pool. Further, the consequential impacts on the Commonwealth Budget from increased expenditure are not canvassed in the Explanatory Memorandum or Interim Response.

The introduction of a floor and a ‘no worse off’ commitment necessitate an increase of the GST pool. That is, the zero sum nature of the current HFE system is removed, requiring pool growth. A key issue for the additional pool is how it will be treated in the relativity recommendation by the CGC.

What is assessed by the CGC is dependent on the Terms of Reference received from the Treasurer, specifically, aspects that should be included or excluded from relativity modelling. Included items in the model will affect the GST relativity, whereas excluded items will not.

The relevant document that outlines the way in which payments are included or excluded is the IGA FFR. Specifically Schedule D advises that, for the purpose of the CGC determining GST revenue sharing relativities:

... general revenue assistance, excluding GST payments, will be treated by ‘inclusion’, recognising that these payments are available to provide untied general budget support to a State or Territory, however, the Commonwealth Grants Commission may treat, on a case by case basis, any component of general revenue assistance as ‘out of scope’ if it considers such treatment is more appropriate (IGA FFR Schedule D—paragraph D66(c)).

The Bill does not define the pool top-up as GST Revenue, suggesting it would currently be treated by ‘inclusion’, meaning it will be factored into the calculation of the GST relativity which may mitigate some of the gain by generating a lower relativity than would otherwise be the case.

Matters not addressed in the Bill

The Bill does not deal with all of the PC Review recommendations, many of which were methodological in nature. The eight recommendations which were ‘accepted—subject to consultation with the states’ by the Commonwealth which are not dealt with are summarised in Appendix A. The PC also made several findings, which are not summarised, noting that the Commonwealth broadly accepted all the PC’s findings.

Two issues stand out as material to considering the impact of the Bill.

A regular critique of the current system is the overall complexity of the methodology and the transparency of how the methodology is implemented. The Bill:

  • requires the operation of parallel HFE systems by the CGC—the current system and the updated system—in order to determine the no worse off guarantee
  • introduces additional terms—the floor—into the relativity modelling
  • adds other funding pools to the formula which are at the sole discretion of the Commonwealth and
  • constrains the decision making on equalisation standard to two states.

Also, there is no guidance on how the current methodology may be simplified. It is unclear how these issues contribute to a reduction in complexity or an increase in transparency.

Second, the PC has recommended a review of the fundamental nature of federal financial relations. At an administrative level this may simply adjust the IGA FFR, at a substantive level this may adjust the need for and volume of payments from the Commonwealth to the states. The discussion about potential reforms is material to understanding the long-term impact of the changes introduced by the Bill.

Other provisions

In addition to the substantive changes to the HFE system achieved by amending the CGC Act and FFR Act, the Bill provides for a review of the operation of the new system.

Specifically, clause 4 requires the Productivity Minister to refer ‘the matter of the operations of the Act’ to the Productivity Commission for inquiry by 31 December 2026. The minimum terms of reference for the inquiry are:

(a)   whether the amendments made by this Act are operating efficiently, effectively and as intended; and

(b)   the fiscal implications for each State, the Australian Capital Territory and the Northern Territory, of the amendments made by this Act.

None of the CGC Act, the FFR Act or the Productivity Commission Act 1998 defines ‘efficiently ‘or ‘effectively’.

Concluding comments

The Bill will implement changes committed to by the Government in its Interim Response to the PC Review, including an updated reasonable standard for HFE, the introduction of a GST relativity floor, a top-up to the GST pool and a ‘no worse off’ guarantee for the states. The changes will not occur for several years. The changes implemented, as a package, were not canvassed by the PC Review, and there is little evidence of the impact of the changes other than the Interim Response itself. Seven states do not agree with the proposed reform of HFE but have noted the ‘no worse off’ guarantee is welcomed. There are a range of recommendations and findings in the PC Review which are not dealt with which may nevertheless alter the federal financial relations system over a long time frame and are material to consider in the context of the Bill.

Appendix A: matters not addressed in the Bill

Recommendation Response
Recommendation 6.2: The CGC — through its Chairperson and Commission members — should provide a strong neutral voice, to facilitate a better-informed public discourse on the HFE system

Accept, subject to consultation with the States.

The Government supports the CGC adopting a greater public educational role. As the subject matter experts, the CGC could help improve understanding of the system which is currently very low, and mitigate the potential for misunderstandings to develop
Recommendation 6.3: The CGC should strengthen its formal interactions with the State and Commonwealth Governments. In particular, when requested by a State Government, it should provide provisional ‘draft rulings’ on the HFE implications of a policy change

Accept, subject to consultation with the States.

The Government notes that the CGC already has strong relationships with the States, including through written papers, informal staff engagements, and formal State visits. Nonetheless, the Government supports the CGC further strengthening these interactions, including by providing States with draft rulings.

Draft rulings could provide the States with greater transparency and certainty on the GST impacts of reform and may further encourage States to pursue beneficial reforms.

Recommendation 6.4: The Commonwealth Government, in consultation with the States, should develop clear guidelines detailing the basis on which Commonwealth payments are to be quarantined from HFE by the Commonwealth Treasurer (so that they do not unnecessarily erode the efficacy of the CGC’s relativities and compromise the objective of HFE).

The guidelines should strike a balance between enhancing accountability and transparency, while not unduly affecting the Treasurer’s ability to quarantine payments in exceptional circumstances that are in the national interest.

Accept, subject to consultation with the States.

The Government supports the development of guidelines that provide an equal playing field for all States. However, the Government notes that there are also sometimes exceptional circumstances where the Commonwealth must act in the national interest

Recommendation 6.5: The Commonwealth Government should strengthen the CGC’s decision-making framework. In particular:

  • the Commonwealth Treasury should provide input, including public submissions, to the CGC’s five-yearly methodology review process, drawing upon its community-wide perspective
  • the Commonwealth Treasurer should nominate specific areas of focus for the CGC in the terms of reference for the five-yearly methodology reviews, following (as is currently the case) consultation with the States

Accept, subject to consultation with the States. The Government supports the Commonwealth Treasury providing the CGC with more input, where this would contribute additional value to the CGC.

The Government also agrees to consider whether there are specific areas that the CGC should focus on during methodology reviews, when developing these terms of reference.

Recommendation 6.6: The CGC should immediately and systematically make the data provided by the States publicly available on its website, along with the CGC’s calculations on these data

Accept, subject to consultation with the States.

Consistent with our ‘open data’ policy, the Government supports the public dissemination of more data. However, such data must be released responsibly, and address concerns such as privacy, commercial sensitivities and/or the possibility for the data to be misinterpreted

Recommendation 7.1: The Commonwealth Treasurer should direct the CGC (in accordance with the refocused HFE objective) to:

  • examine simpler and more aggregated revenue and expenditure assessments that use more policy-neutral indicators, consistent with achieving a reasonable standard of services
  • adopt significant increases in materiality thresholds, which would assist in determining and applying more policy-neutral category level indicators.

This initial direction should be embedded in revised terms of reference for the CGC’s 2020 methodology review

Accept, subject to consultation with the States.

The Government agrees there is merit in exploring the use of more policy-neutral indicators. These indicators would simplify the HFE system and could reduce disincentives for States to pursue beneficial policy reforms.

The Government also agrees there is merit in raising the materiality thresholds within assessments, which would simplify the system and ensure that only the most important factors are considered in assessing State’s relative fiscal capacities.

The Government notes that the CGC is currently undertaking a major methodology review, which could provide an ideal opportunity to thoroughly explore these issues

Recommendation 9.1: Improvements to the HFE system can only go so far.

The Commonwealth and State Governments, through the Council on Federal Financial Relations and recently formed Board of Treasurers, should work towards meaningful reform to federal financial relations.

In the first instance, the process should:

  • assess how Commonwealth payments to the States — both general revenue assistance and payments for specific purpose — interact with each other, given the significant reforms to payments for specific purposes that have occurred in recent years
  • develop a better-delineated division of responsibilities between the States and the Commonwealth and establish clear lines and forms of accountability. Policies to address Indigenous disadvantage should be a priority.

Following this, options to address the vertical fiscal imbalance should be considered and advanced.

Accept in-principle, subject to consultation with the States.

Commonwealth-State relations are fundamental to the smooth operation of our country. To ensure this relationship continues to remain effective, we should constantly review and refine it

Recommendation 3.2 [extract from the 2012 Review, dealt with in the PC Review] on rounding relativities: To ensure the system does not appear to be falsely precise, the Panel recommends that relativities produced from the CGC’s process be rounded to two decimal places in the annual Updates and Reviews

Accept, subject to consultation with the States.

In addition to the PC’s Recommendations, the Government agrees that implementing this additional recommendation from the 2012 GST Distribution Review would further address false precision in the system

Source: Australian Government, Productivity Commission inquiry into horizontal fiscal equalisation: Government interim response, op. cit., pp. 24–27.


[1].      Australian Government, Federal financial relations: budget paper no. 3: 2018–19, Table 1.1, p. 5.

[2].      ‘GST Imposition Acts’ is defined at section 4 of the FFR Act as A New Tax System (Goods and Services Tax Imposition—Customs) Act 1999; A New Tax System (Goods and Services Tax Imposition—Excise) Act 1999; A New Tax System (Goods and Services Tax Imposition—General) Act 1999; A New Tax System (Goods and Services Tax Imposition (Recipients)—Customs) Act 2005; the A New Tax System (Goods and Services Tax Imposition (Recipients)—Excise) Act 2005 and A New Tax System (Goods and Services Tax Imposition (Recipients)—General) Act 2005.

[3].      ‘GST Act’ is defined at section 4 of the FFR Act as the A New Tax System (Goods and Services Tax) Act 1999.

[4].      The pool is reduced by other items that are specified in subsection 6(4), which is not dealt with in this Digest.

[5].      Productivity Commission (PC), Horizontal fiscal equalisation, PC, Inquiry report, 88, 15 May 2018, p. 64 (PC Review).

[6].      Commonwealth Grants Commission, History of commission methods, Information paper, May 2016, p. 8.

[7].      Ibid.

[8].      The GST base and rates are governed by the A New Tax System (Goods and Services Tax) Act 1999 and A New Tax System (Managing the GST Rate and Base) Act 1999.

[9].      R Garnaut and V FitzGerald, A review of the allocation of Commonwealth grants to the states and territories: final report, Review of Commonwealth-State Funding, August 2002, p. 4 cited in Productivity Commission, Horizontal fiscal equalisation, Inquiry report, op. cit., p. 54 .

[10].    G Parker, ‘Gillard promises new deal on GST carve-up’, The West Australian, 31 March 2011, p. 1.

[11].    J Brumby, B Carter and N Greiner, GST Distribution Review: final report, October 2012, p. 173; cited in PC Review, op. cit., p. 54.

[12].    National Commission of Audit, Towards responsible government: phase one, February 2014, p. xxxvi.

[13].    Ibid.

[14].    Australian Government, Reform of the Federation White Paper: COAG and Federal Financial Relations, Issues paper 5, February 2015, p. 4.

[15].    Ibid., pp. 44–56.

[16].    R Viellaris, ‘Turnbull delays release of report on federalism’, The Courier Mail, 17 February 2016, p. 4.

[17].    M Larkins (Acting Deputy Secretary, Social Policy, Department of the Prime Minister and Cabinet), Evidence to the Senate Finance and Public Administration References Committee, Inquiry into the Outcomes of the 42nd meeting of the Council of Australian Governments, 27 April 2016, p. 30.

[18].    PC Review, op. cit., p. 54.

[19].    PC Review, op. cit., pp. iv-v.

[20].    Productivity Commission, Horizontal fiscal equalisation, op. cit.

[21].    Ibid., pp. 37–44.

[22].    Australian Government, Productivity Commission inquiry into horizontal fiscal equalisation: Government interim response, July 2018.

[23].    J Frydenberg (Treasurer), ‘Council on Federal Financial Relations meeting’, media release, 3 October 2018.

[24].    Senate Standing Committee on Economics, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, 8 November 2018.

[25].    Senate Standing Committee on Economics, Submissions on the inquiry into the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, The Senate, Canberra.

[26].    Senate Standing Committee on Economics, Public Hearings on the inquiry into the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, The Senate, Canberra.

[27].    Senate Standing Committee on Economics, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018 [Provisions], November 2018, pp. 10–11.

[28].    Ibid., pp. 11–13.

[29].    Ibid., pp. 13–14.

[30].    Ibid., pp. 14–15.

[31].    Ibid., p. 16.

[32].    Ibid.

[33].    Ibid., p. 24.

[34].    Ibid.

[35].    M Cormann (Minister for Finance), cited in J Spagnolo, ‘Opinion: power failure on GST’, The Sunday Times, 25 May 2014, p. 71.

[36].    D Smith (WA Senator), ‘Opinion: solid GST floor would restore security to state finances’, The Australian Financial Review, 15 April 2015, p. 47.

[37].    M Turnbull (Prime Minister), Address at WA Liberal State Conference, Transcript, 13 August 2016.

[38].    S Parry, D Bushby, E Abetz and J Duniam, Tasmanian Liberal Senators support State Government stance on GST, joint media release, 15 August 2016; G Hutchens, ‘Eric Abetz joins other Tasmanian Liberal senators to oppose GST formula changes’, The Guardian, 15 August 2016.

[39].    R Wilson (Member for O’Connor), ‘Second reading speech: Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018’, House of Representatives, Debates, (proof), 23 October 2018, p. 7.

[40].    No author, ‘Shorten to keep hands off state GST carve up’, The Sunday Times, 30 August 2015, p. 14.

[41].    G Hutchens, ‘Eric Abetz joins other Tasmanian Liberal senators to oppose GST formula changes’, op. cit.

[42].    B Shorten (Leader of the Opposition), Federal Labor will give Western Australia a fair share, media release, 26 August 2017.

[43].    B Shorten (Leader of the Opposition), ‘SUBJECTS: Labor’s plan to deliver a fair share of GST for WA; Liberal Party chaos; Julia Banks resignation; Abbott appointment to special envoy for Indigenous Australians’, Doorstop, 29 August 2018.

[44].    Australian Labor Party, ‘Second reading speeches: Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018’, House of Representatives, Debates, 23 October 2018.

[45].    See for example, A Wilkie,’ Second reading speeches: Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018’, House of Representatives, Debates, (proof), 23 October 2018; and comments from Senator Griff in P Jean, ‘Marshall gives nod to vast GST reform’, The Adelaide Advertiser, 6 July 2018, p. 19.

[46].    Senate Standing Committee on Economics, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018 [Provisions], op. cit., pp. 7–9.

[47].    Ibid., p. 11.

[48].    Explanatory Memorandum, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, p. 7.

[49].    The Statement of Compatibility with Human Rights can be found at page 23 of the Explanatory Memorandum to the Bill.

[50].    Defined in subclause 4(4) as the Minister administering the Productivity Commission Act 1998. Under the latest Administrative Arrangements Order, this is the Treasurer.

[51].    Senate Standing Committee on Economics, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018 [Provisions], op. cit., pp. 14–15.

[52].    Ibid., p. 15.

[53].    Ibid.

[54].    Northern Territory Government, Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, October 2018, p. 9; Victoria State Government, Submission to Senate Economics Legislation Committee, Inquiry on the provisions of the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, 24 October 2018, p. 5; Queensland Government, Submission to the Senate Standing Committee on Economics, Inquiry into the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, 24 October 2018, p. 6; and, ACT Government, Submission to the Senate Economics Legislation Committee, Inquiry into the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, 24 October 2018, p. 3.

[55].    PC Review, op. cit., p. 247.

[56].    Ibid., p. 247.

[57].    Australian Government, Productivity Commission inquiry into horizontal fiscal equalisation: Government interim response, op. cit., p. 16.

[58].    Commonwealth Grants Commission, ‘Supporting information’, Relativities over time workbook, Table S9-2.

[59].    Explanatory Memorandum, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, p. 17.

[60].    Australian Government, Productivity Commission inquiry into horizontal fiscal equalisation: Government interim response, op. cit., p. 17.

[61].    PC Review, op. cit., pp. 230–231.

[62].    Ibid., p. 231.

[63].    Ibid., pp. 229–231.

[64].    J Brumby, B Carter and N Greiner, GST Distribution Review: interim report, March 2012, p. 41.

[65].    Ibid., p. 37.

[66].    The Treasury, Submission to the GST Distribution Review, October 2011, p. 63.

[67].    Ibid.

[68].    T Crook (Member for O’Connor), ‘Private Member's Business: Goods and Services Tax’, House of Representatives, 12 September 2011, p. 9687.

[69].    Australia, House of Representatives, ‘GST Revenue for Western Australia’, Votes and proceedings, HVP 83, 24 November 2011.

[70].    Explanatory Memorandum, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, p. 18.

[71].    PC Review, op. cit., p. 261.

[72].    Explanatory Memorandum, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, p. 19.

[73] .   Senate Standing Committee on Economics, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018 [Provisions], op. cit., p. 12.

[74].    S Atkinson (Deputy Secretary, Fiscal Group, The Treasury), Evidence to the Senate Economics Legislation Committee, Inquiry into the provisions of the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, 26 October 2018, p. 52.

[75].    Board of Treasurers, Vow to ensure all states GST winners, media release, 3 August 2018.

[76].    Explanatory Memorandum, Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, p. 17.

[77].    S Atkinson (Deputy Secretary, Fiscal Group, The Treasury), Evidence to the Senate Economics Legislation Committee, Inquiry into the provisions of the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Bill 2018, op. cit., p. 51.

[78].    Ibid.

 

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