Accounting for GST and budget assistance to States and Territories (the States)
Under the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (the IGA), all goods and services tax (GST) receipts are appropriated to the States and Territories and thus are not available for expenditure by the Australian Government. As such, the GST is a State tax, with the Australian Taxation Office acting as the States’ agent in the collection of the tax. Consequently, collections of GST from taxpayers and payments of the GST to the States are not recorded as revenues and expenses of the Australian Government in Part 1.
Under the IGA, the Australian Government has guaranteed that the budgetary position of each individual State and Territory will be no worse off than it would have been had the GST reforms not been implemented. Grants to the States to meet this guarantee are titled ‘general budget assistance to the States’ (GBA) and are recorded as expenses of the Australian Government.6 GBA comprises Budget Balancing Assistance (BBA) grants paid in accordance with the provisions of the IGA and any adjustments to account for actual GST cash collections. For States no longer receiving BBA grants, GBA relates to the difference between actual GST cash receipts and the Commissioner of Taxation’s mid-June determination of cash GST receipts.
In Part 2, the accounts are presented including GST as Australian Government revenue. In addition to GBA, the Part 2 fiscal balance is adjusted for the accrual GST revenue less actual cash GST receipts, which are payable to the States and Territories. This results in the Part 2 fiscal balance being $283 million greater than the fiscal balance reported in Part 1 and elsewhere in the Final Budget Outcome. A reconciliation of GFS revenue and GFS expenses in Part 1 and Part 2 is presented in Table A2.
The different accounting approaches also flow through to differences in GFS net worth, resulting in GFS net worth in Part 2 being $1.6 billion greater than GFS net worth reported in Part 1 and elsewhere. This difference results from the inclusion of GST receivables and payables in the GFS balance sheet in Part 2.
However, the net impact on cash flows is the same regardless of the accounting approach. Therefore the underlying cash balance is the same whether it is calculated on the basis that the GST is a State tax or an Australian Government tax.
Further information on accounting for GST and budget assistance to the States and Territories can be found on page 10 of the Final Budget Outcome 2000-01.
6 The term ‘general budget assistance to the States’ explains aggregate changes in Australian Government expenses under a States’ agent accounting arrangement and does not appear in the IGA, which governs the actual payments from the Australian Government to the States.