Victoria to pocket an extra $3.8bn in GST revenue in Commonwealth Grants Commission carve up

Victoria will be granted an additional $3.8bn in GST revenue under the latest carve up to be announced on Tuesday.

Victoria is set to get almost $3.8bn extra in GST revenue in a massive win for the state under next year’s carve-up.

New figures from the Commonwealth Grants Commission revealed on Tuesday show that Victoria’s share of the GST pool will rise from 21.9 per cent to 24.8 per cent.

This means that instead of receiving 85 cents in the dollar it will receive 96 cents, or an estimated $3.7bn more than 2023-24.

The total GST payment will be $22.2bn in 2024-25, up from $18.4m this year.

Victoria’s increase was driven by its reduced capacity to raise mining revenue relative to other states, as well as revised 2021 census data which increased its urban population and urban density.

The GST pool is estimated to grow from around $85bn in 2023–24 to around $89bn in 2024–25.

Every state except New South Wales and Queensland is estimated to receive more in total GST and no worse off payments than they received in 2023–24.

Victorian Premier Jacinta Allan says she is pleased that the commission had given Victoria a fairer share. Picture: AAP Image

NSW will receive $24.2bn in GST payments, or $310m less than 2024-25, because it had an above-average ability to raise taxes, received more coal royalties and had a below-average cost of providing services.

This means it will get 86 cents in every dollar, down from 92 cents.

Queensland will receive $17.5bn, down from $17.9bn this year.

Premier Jacinta Allan said she was pleased that the commission had “recognised previous inequity in the GST allocation and that Victoria is receiving a much fairer share.”

“I would like to acknowledge that this is how the Commonwealth Grants Commission should work,” she said.

“It should take into account the circumstances of each state.”

Ms Allan said Victoria had “gone it alone for far too long”.

“This is a really serious matter, which is why we will continue to push for the no worse off guarantee to be made permanent, because that’s only fair,” she said.

Victorian Treasurer Tim Pallas has long complained about the amount of GST Victoria gets. Picture: David Geraghty

Economist Saul Eslake said Victoria was the biggest winner out of the latest distribution but hastened to add that was because it was “becoming a poor state”.

Mr Eslake said the upcoming state budget would reveal how the Allan government decided to spend the extra money, adding the boost meant that state debt might now go “up at a slower rate”.

“The point about the revenue from the GST is that it’s untied, it can be spent however the state government chooses to spend it,” he said.

Mr Eslake said on a per capita basis, Victoria had gone from having above-average value for its goods and services and household disposable income, to being well below.

He said it was “outrageous” that Western Australia was getting “$6.2bn more than it should” under the GST deal, which has a floor of 75 cents in 2024-25.

“WA is the richest state in the country and it’s the only one running budget surpluses so this will allow it to run even bigger ones,” Mr Eslake said.

WA will get $2454 in GST per person, while Victoria gets $3158 per person.

Federal Treasurer Jim Chalmers last year cut a deal with state and territory leaders to extend the “no worse off” provision for three years until the end of 2029-30.

However, most states fear they will be worse off unless it becomes a permanent part of the distribution.

Victorian Treasurer Tim Pallas has been fighting for it to be made permanent, arguing that states need certainty of their expected revenues to plan for the future.

The Allan government is also pushing for Victoria to get its “fair share” of Commonwealth infrastructure and health funding.

But not all states will be happy with the latest carve-up, with NSW and Queensland expected to lose cash.

Last year, a decline in population growth in the census resulted in Victoria’s transport investment needs being slashed.

Reduced spending on natural disaster relief and increased spending on services used by First Nations peoples nationally was also behind a fall in Victoria’s assessed GST needs.

Originally published as Victoria to pocket an extra $3.8bn in GST revenue in Commonwealth Grants Commission carve up