The A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 (the Act) provides that the States receive all GST revenue. The GST revenue pool is distributed to the States on the basis of recommendations of the Commonwealth Grants Commission (CGC), which applies the principles of Horizontal Fiscal Equalisation to help determine State revenue shares. Budget Paper No. 3, Federal Financial Relations 2005-06, provides more detail on Horizontal Fiscal Equalisation.
Under the Act, the Commissioner of Taxation (the Commissioner) is required to make a determination by 20 June each year of the estimated GST revenue collections for the year. In accordance with the Commissioner’s determination of GST revenue on 15 June 2005, a total of $35,322.7 million in GST revenue was provided to the States in 2004-05. This reflects a GST revenue estimate for 2004-05 of $35,350 million less a $27.3 million adjustment for the difference between the Commissioner’s determination of 2003-04 GST collections and the 2003-04 GST outcome. The Commissioner’s estimate of GST for 2004-05 was broadly consistent with both the estimate at Budget and the final GST revenue outcome as reported in Appendix A and in Note 18 in Part 3.
The final provision of GST revenue to the States in 2004-05 is illustrated in Chart 1.
Chart 1: GST revenue provision to the States and Territories
The calculation of the distribution of GST revenue to the States is shown in Table 31. The distribution differs marginally from estimates shown in Budget Paper No. 3, Federal Financial Relations 2005-06, reflecting final determinations made under the Act.
The 2004-05 GST revenue was distributed, in accordance with the Act, using GST relativities recommended by the CGC.
Table 31 shows the per capita relativities applied to the States’ populations (as at 31 December 2004) in order to arrive at a weighted population share for each State. A State’s share of GST revenue is equal to its weighted population share of the combined GST revenue and unquarantined Health Care Grants (HCGs), less the unquarantined HCGs it receives.
Table 31: GST revenue provision to the States and Territories