General revenue assistance
In 2004-05, general revenue assistance to the States comprised National Competition Policy Payments, Compensation for GST Deferral and Special Revenue Assistance.
Budget Balancing Assistance
As previously noted, the Australian Government has guaranteed that in each of the transitional years following the introduction of tax reform, each State’s budgetary position will be no worse off than had the reforms not been implemented. This is given effect to by the payment of transitional assistance in the form of Budget Balancing Assistance (BBA).
In June 2005, it was determined that no State required BBA in 2004-05 as each State’s share of GST revenue exceeded its Guaranteed Minimum Amount (GMA). Total GST revenue payments to the States exceeded their combined GMAs by $2,001.2 million. This is consistent with the Budget estimate, which also showed that no State would require BBA in 2004-05.
The calculation of State GMAs and BBA entitlements for 2004-05 is shown in Table 32.
Table 32: Guaranteed Minimum Amount components, GST revenue provision and Budget Balancing Assistance to the States and Territories
- Where the difference between the GMA and GST revenue is less than zero, the amount is zero.
National Competition Policy Payments (NCPPs)
NCPPs are distributed between the States on an equal per capita basis. Payment is subject to each State achieving satisfactory progress in implementing specified reforms under the Agreement to Implement the National Competition Policy and Related Reforms. Out of a maximum level of payments in 2004-05 of $777.9 million, the National Competition Council (NCC) recommended permanent deductions of $26.3 million and suspensions of $114.1 million. The payments made to the States in 2004-05, as set out in Table 33, reflect that the permanent deductions and suspensions recommended by the NCC were agreed to by the Australian Government and applied accordingly. Actual payments to the States of $724.4 million also included adjustments finalising 2003-04 competition payments.
Table 33: National Competition Policy Payments
Compensation payments for GST revenue deferred
The Australian Government is compensating the States for the deferral of GST revenue as a result of the Australian Government’s decision to allow certain small businesses and non-profit organisations to pay GST annually. As part of these arrangements, $219.4 million has been paid to the States in 2004-05 as an advance from their 2005-06 GST entitlements.
Consistent with the requirements of the A New Tax System (Commonwealth-State Financial Arrangements) Act 1999, the Australian Government will deduct this advance from GST payments to the States in 2005-06. However, the Australian Government will pay a grant in 2005-06 to compensate for the estimated impact of the measure on GST revenue collections in 2004-05 and 2005-06, ensuring that the full financial impact of the measure is felt by the Australian Government and that the measure will have no impact on State budgets.
Table 34: Compensation for GST deferral
Special Revenue Assistance
In 2004-05, in accordance with the recommendations of the CGC, Special Revenue Assistance of $14.2 million was paid to the Australian Capital Territory.