GST revenue to the States

In 2006-07, $39.6 billion in GST revenue was provided to the States, up by $2.4 billion (6.4 per cent) from 2005-06.

Under the Act, the amount of GST paid to the States is determined by the Commissioner of Taxation by 20 June each year, based on estimated GST receipts for that year and including any balancing adjustment for the previous year. For 2006-07, the Commissioner's GST determination was $39,552 million. This reflects the Commissioner's estimate of GST receipts for 2006-07 of $39,580 million, less a $28 million adjustment for the overpayment in respect of 2005-06. The 2006-07 outcome for GST receipts was $39,560 million, resulting in a $20 million overpayment of GST revenue to the States. An adjustment will be made to GST revenue to the States in 2007-08 to ensure that they receive every dollar of GST collected.

The calculation of the amount of GST paid to the States in 2006-07 is shown in Table 32.

Table 32: GST revenue paid to the States

1. The Commissioner's estimate of receipts for 2006-07 was $20 million higher than the 2006-07 outcome.
2. The Commissioner's estimate of receipts for 2005-06 was $28 million higher than the 2005-06 outcome.

As agreed by all States in the Intergovernmental Agreement, GST revenue is distributed among the States in accordance with the principle of horizontal fiscal equalisation and having regard to the recommendations of the Commonwealth Grants Commission. Budget Paper No. 3, Federal Financial Relations 2007-08, provides more detail.

The distribution of GST revenue between the States in 2006-07 is illustrated in Chart 1.

Chart 1: State shares of GST revenue, 2006-07

In 2006-07, GST revenue was distributed in accordance with the Act, using the GST relativities in Table 33, as endorsed by the Ministerial Council for Commonwealth-State Financial Relations. The GST relativities are applied to the Australian Statistician's determination of state populations in order to determine a weighted population for each State. Each State is then allocated its population-weighted share of the combined pool of GST revenue and unquarantined health care grants.

The Intergovernmental Agreement defines the GST pool for a financial year to consist of GST revenue plus unquarantined health care grants provided by the Australian Government under Australian Health Care Agreements. The Minister for Health and Ageing determines the amount of health care grants.

The final distribution of GST revenue is determined by deducting the unquarantined health care grants, which are separately provided to the States, from each State's share of the GST pool.

Table 33: Distribution of 2006-07 GST revenue among the States^(a)

1. The total of the weighted populations in column 3 differ from the total of the populations in column 1. This is a consequence of the population estimates in column 1 being revised subsequent to the Commonwealth Grants Commission calculating the GST relativities.

GST administration costs

Because the GST has a national tax base, but all GST revenue is provided to the States, the Intergovernmental Agreement provides for the Australian Taxation Office to administer the GST on behalf of the States. Consequently, the States compensate the Australian Government for the agreed costs incurred by the Australian Taxation Office in administering the GST.

In March 2006, the Ministerial Council for Commonwealth-State Financial Relations agreed to a GST administration budget of $619.1 million for 2006-07, including additional funding for GST compliance activities of $10.6 million. This was subsequently revised to $618.5 million due to a lower revised estimate of the costs.

Once the outcome for GST administration in 2006-07 is audited, any required adjustment will be incorporated into the States' administration costs for 2007-08.