Prime Minister Malcolm Turnbull says he won’t reduce SA’s share of GST funding by $3.9 billion
UPDATE: South Australia has been promised an extra $257 million under a major overhaul of the way GST revenue is shared between the states — and no new taxes will be imposed to pay for it.
- Analysis: Why we should care about GST changes
- ScoMo rules out GST hike
- Premier says he’ll fight cut in SA’s GST share
- Turnbull says GST carve up plan will ‘pass the pub test’
- SA in $500m GST Federal Budget windfall
Read below: Turnbull goes halves in KI airport bailout
SOUTH Australia has been promised a $257 million budget boost under a major overhaul of the way GST revenue is shared between the states.
Federal Treasurer Scott Morrison today gave an iron-clad guarantee that all states will be better off under the biggest reforms to revenue-sharing since the GST was introduced in 2000.
He ruled out raising the GST above 10 per cent as the government attempts to win support for its “fair go” GST overhaul.
He also declared there will be no new taxes imposed on Australians to pay for a $7.2 billion “boost” for the states, which will be paid from federal government coffers to ensure no state is worse off.
Yesterday, Prime Minister Malcolm Turnbull said during a Kangaroo Island visit: “No state will be worse off as a result of the reforms. In fact, each state will be better off,”
GST distribution has been a long-running issue with potential ramifications at the next federal election.
States including SA, which last year earned $1.43 for every GST dollar spent in Australia, as well as Tasmania and Queensland, had raised concerns that a change to GST distribution would have a negative impact on revenue from the Commonwealth.
Western Australia, which earned just 34 cents for every GST dollar distributed by the Commonwealth, has lobbied heavily for changes to the system.
The Federal Government has argued a mining boom in WA during the past decade had created unforeseen volatility in the system, justifying a shift to a new model.
Mr Morrison said his reforms were designed to ensure all states received at least 75 cents for every dollar of GST revenue raised within their borders.
The introduction of a 75 cent floor could have left SA worse off, but the Turnbull Government has promised to top up the national GST revenue pool by $7.2 billion between 2021-22 and 2028-29 to ensure funding for all states grows.
“This would leave all states and territories better off under a new, more stable equalisation standard, with additional funding that state governments can use to deliver essential services,’’ he said.
South Australian treasurer Rob Lucas welcomed the news on Thursday, arguing the productivity commission plan could have cost South Australia $500 million.
“At this stage it is a really good deal because we were staring down a financial disaster,” he said.
Opposition Treasury spokesman Stephen Mullighan warned compensation payments were a pittance and the new model could leave South Australia worse off in the long term.
In the period up to 2026-27, SA will receive $257 million more than it would have under the present funding model.
State governments will be able to spend the top-up money on services of their choice.
This top-up funding would be indexed to the growth of GST revenue after 2028-29 to ensure funding for all states continued to increase.
“This will be the first time real changes have been made to fix problems in how the GST is shared since it was introduced almost 20 years ago,’’ Mr Morrison said.
“This problem has been kicked down the road for too long and it is time we now got on and fixed it.”
The Productivity Commission had recommended changes to the GST distribution formula, which would have left SA $3.9 billion worse off by 2026-27.
The announcement aims to boost the Liberal Party’s chances of winning the July 28 by-elections in Mayo, the Queensland seat of Longman and Braddon in Tasmania.
Premier Steven Marshall had previously threatened to fight any funding changes that could hurt SA.
SA will receive about $6.7 billion from the national GST funding pie next financial year, under a determination already made by the Commonwealth Grants Commission.
The new revenue-sharing model will move away from trying to ensure all of the states have the same capacity to deliver services as the fiscally strongest state, which is WA.
To reduce volatility, the states will have their funding capacity benchmarked to NSW or Victoria, depending on which of those two states is fiscally stronger.
The change is designed to prevent a repeat of the situation where WA only received 30 cents for every dollar of GST it raised as a result of the mining boom.
In order for the changes to go ahead, they will have to be approved by all governments. Mr Morrison said he would hold a meeting with state and territory treasurers by September, with a view to reaching an agreement on transition arrangements by the end of the year.
“States will have the opportunity to interrogate the available data and propose alternative approaches during this time,’’ he said.
The Productivity Commission had wanted to determine GST funding on a new averaging model, which would have resulted in all states, except WA and NSW, receiving less.
Turnbull goes halves in KI’s airport cost bailout
PRIME Minister Malcolm Turnbull has used his third visit to the Mayo by-election trail to bail out the Kangaroo Island Council from a significant airport cost blowout.
Mr Turnbull announced that he and Premier Steven Marshall would each kick in $1.25 million to cover the cost overrun in upgrading the island’s airport terminal at its official launch on Wednesday.
It was Mr Turnbull’s second visit to South Australia in five days as the Mayo by-election battle between Centre Alliance’s Rebekha Sharkie and Liberal candidate Georgina Downer heats up.
Kangaroo Island Mayor Peter Clements said the council’s rate cap meant that it would have been forced to pass on the cost to the ratepayers. “It would have been very difficult for us not to reach out to the ratepayer and say we have a shortfall of $3 million and we need to fund it somehow,” Mr Clements said.
“I’m sure Regional Express and Qantas wouldn’t like us putting the passenger levy up, so the only thing we could have done is go back to the ratepayer.”
Ms Downer continues to lag behind Ms Sharkie in the polls, but Mr Turnbull said a recent flurry of funding, including last week’s Future Frigates announcement, was not an attempt to turn around her electoral prospects.
“The timing is coincidental. It’s good to be here with Georgina, but these are projects that are part of our long-term commitment,” he said.