GST revenue provision to the states

All GST revenue collected is received by the states. Consequently, they have a secure, growing and broad-based revenue source. Subject to the IGA, states can spend their GST revenue according to their own budgetary priorities. The states’ GST revenue has grown significantly since its introduction in 2000-01 (Table 3).

Table 3: GST revenue provision to the states (cash), 2000-01 to 2005-06

5. Estimates.

GST revenue

Estimates of GST revenue in accrual terms for the years 2004-05 to 2007-08 are shown in Table 4. These estimates have been revised since the 2004-05 Budget and the Mid-Year Economic and Fiscal Outlook 2004-05 (MYEFO) to account for policy decisions and parameter variations.

Table 4: Reconciliation of GST revenue (accrual), 2004-05 to 2007-08 (estimated)

Estimated GST revenue in 2004-05 has been revised up by $260 million since MYEFO. The GST revenue estimate for 2005-06 has been revised up since MYEFO by $80 million, reflecting the flow-on effect of an expected stronger outcome in 2004-05, dampened by expected weaker growth in consumption in 2005-06. Estimates of GST receipts in cash terms are shown in Table 5.

Table 5: GST receipts (cash), 2005-06 to 2008-09 (estimated)

GST revenue measures

Policy decisions affecting GST revenue estimates include: taxing offshore supplies of options or rights where they relate to goods, services and other things that are consumed or used in Australia; removing the GST‑free status of supplies made to offshore owners in relation to their residential property in Australia; allowing GST-free supplies of certain care services and accommodation to residents of serviced apartments in retirement villages; ensuring that the GST vouchers provisions apply appropriately to pre‑paid phone products; providing a further optional methodology for compulsory third party insurers to calculate decreasing adjustments; providing additional compliance funding for the Australian Customs Service; and deferring the commencement date of the measure to allow certain taxpayers to report and pay their GST on an annual basis.

The revenue effect of these GST measures is estimated for 2005-06 to 2008-09 (Table 6). Detailed information on each measure is in Appendix A.

Table 6: GST revenue measures since the 2004-05 Budget (estimated)

GST revenue provision

The Australian Government distributes GST revenue among the states in accordance with the recommendations of the Commonwealth Grants Commission.

The CGC recommends relativities to calculate each state’s share of GST by applying the principles of Horizontal Fiscal Equalisation. GST relativities are shown for 2004-05 and 2005-06 (Table 7).

The CGC also recommends Financial Assistance Grants forgone relativities (Table 7), which are used for the calculation of each state’s Guaranteed Minimum Amounts (Tables 11 and 12).

Table 7: GST relativities and Financial Assistance Grants forgone relativities, 2004-05 and 2005-06

Source: CGC Report on State Revenue Sharing Relativities 2005 Update.

The GST relativities are applied to state populations to determine a weighted population for each state. The Australian Government uses the weighted populations to distribute the GST revenue pool. Each state receives a share of the GST revenue pool equal to its weighted population share of a combined pool of GST revenue and unquarantined Health Care Grants, less its unquarantined Health Care Grants. This calculation determines the distribution of GST revenue in 2004-05 and 2005-06 (Tables 8 and 9).

Table 8: Distribution of GST revenue in 2004-05 (estimated)

1. Total weighted population differs from the total population in column (1) as the CGC calculates the per capita relativities using population numbers for 1998-99 to 2002-03, then rounds these figures.

Note: HCGs means Health Care Grants.

Table 9: Distribution of GST revenue in 2005-06 (estimated)

1. Total weighted population differs from the total population in column (1) as the CGC calculates the per capita relativities using population numbers for 1999-00 to 2003-04, then rounds these figures.

Note: HCGs means Health Care Grants.

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