A change in the definition of Coffs Harbour will cost NSW millions and other states win or lose on similar technicalities. These are the mysteries of the GST allocation system.
Add articles to your saved list and come back to them any time.The NSW Mid North Coast holiday centre of Coffs Harbour has, apparently, moved – at a huge cost to the state’s taxpayers.
Usually, the release of the grants commission’s annual carve-up of the GST grabs the interest of a few Treasury officials and a couple of treasurers.But this week’s report on how the $90 billion will be shared in 2024-25 has started a nationwide debate, pitting state Labor treasurer against state Labor treasurer.
That is how parts of a state are defined, via a process overseen by the Australian Bureau of Statistics, that led to the Coffs Harbour, Devonport and Mount Gambier changes. Vladimir Putin’s invasion of Ukraine in February 2022 drove the price of a tonne of coking coal from around $US140 to a peak of $US432, delivering a multi-billion windfall to the coal-exporting states of Queensland and NSW. The grants commission took most of that windfall away.
Scott Morrison’s GST deal was expected to cost just $8 billion over 8 years. It’s on track to reach $50 billion over a decade.It also exposed the tension within the grants commission process that has been simmering since the 2010s. But the actual cost reached almost $4.2 billion. In 2022-23, the federal budget took a $4.1 billion hit due to the deal. This financial year, the impost is expected to reach $4.9 billion with another $5.2 billion in 2024-25. The estimated total cost by the end of this decade is around $50 billion.
It estimated if NSW or Victoria halved their stamp duty rates and replaced that lost revenue with a land tax, both would lose more than $330 million in GST revenues with other states rewarded for not improving their tax base.The GST deal will cost taxpayers, on average, $400 each by the end of the decade, according to Chris Richardson.
Richardson says a straight per-person carve-up of the GST, maybe accounting for a state’s Indigenous population, would be much simpler. The federal government, already topping up the GST system through the Morrison “fix”, could use this cash to then target particular problems from housing to Indigenous services.
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