Treasurer Rob Lucas tells Budget Estimates Committee he will launch independent review into Australia’s GST system

Treasurer Rob Lucas says Australia’s GST system is unfair, and he will set up an independent review to get his federal counterparts to act.

The state government will launch an independent review into the country’s “unfair” GST arrangements, Treasurer Rob Lucas has told parliament.

Facing questions from Opposition treasury spokesman Stephen Mullighan during a Budget Estimates Committee on Wednesday, Mr Lucas vowed to appoint a “suitable independent person with a national reputation” to conduct the review.

In July 2018, Prime Minister Scott Morrison unveiled a major overhaul of the way GST revenue is shared between the states, largely in response to long-running complaints from WA that it was being short-changed after a mining boom.

Under the changes, SA was told to expect a $257m budget boost over 10 years. Mr Lucas later argued changing economic circumstances, such as rising iron ore prices, could remove any benefit to SA.

He lobbied against any change to the system, but in the end settled for a “no-worse-off guarantee” – a method of top-up payments from the commonwealth – that is set to expire in 2026-27.

Despite Premier Steven Marshall selling the temporary guarantee as a “massive win for the people of South Australia” in 2018, the Treasurer is now moving to review the whole system.

Mr Lucas said he wrote to Federal Treasurer Josh Frydenberg in March, unsuccessfully requesting him to bring forward a Productivity Commission inquiry, which will examine the effectiveness of the system at the end of 2026-27.

Treasurer Rob Lucas has flagged an independent review into the national GST system. Picture: Kelly Barnes/Getty Images

Mr Lucas revealed the commitment following questions from Opposition treasury spokesman Stephen Mullighan.

“In our respectful view, some of the federal Treasury estimates as to what the impact would be have not proved to be the case and that, therefore … it would be better to have this review done by the Productivity Commission well before 2026-27,” Mr Lucas said.

“I am intending to commission, on behalf the state government, an independent review in lieu of the Productivity Commission review.”

Mr Lucas wants the no-worse-off guarantee to last forever.

Mr Mullighan said the current “dud” GST deal will cost SA $258m a year, according to modelling done by Victoria’s Treasury and Finance Department.

A previous Productivity Commission review before the 2018 overhaul recommended a system that would have caused the state to lose $3.9bn over 10 years. The federal government did not adopt the recommended formula.

Mr Mullighan warned bringing forward the 2026-27 review “would only risk more of our GST share”.

Mr Lucas said the state was already at “significant financial risk” from the deal.

“We are not changing the circumstances of the financial risk,” he said.

“What we want to do is provide any sort of greater light or transparency on the current arrangements, which we believe are potentially going to be unfair to … probably all jurisdictions, with the exception of Western Australia.”

Mr Lucas said the state was powerless in fighting the GST changes.

“The position in relation to the current arrangements were not agreed; no deal was signed off by the Premier and myself,” he said.

“We then lobbied with most of the other state and territory governments to amend the legislation to put in a no-worse-off guarantee.”

The 2018 changes were made to protect WA after its GST revenue fell to just 30c in the dollar following a mining boom. WA’s share of the pie will be 83 cents in the dollar by 2026-27.

The overhaul was based on the assumption that WA’s mining industry would stabilise and not experience another massive boom – but this has not been the case.

A renewed mining boom generated a $2bn GST windfall for the state this year, much to the displeasure of other states and territories.

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Originally published as Treasurer Rob Lucas tells Budget Estimates Committee he will launch independent review into Australia’s GST system