New South Wales is set to emerge as the main loser in the latest goods and services tax (GST) distribution, while Western Australia will receive an extra $5.5 billion. The boost for WA comes from a deal struck in 2018, which has allowed the state to benefit disproportionately from the GST carve-up.
The Commonwealth Grants Commission released its recommendations for the allocation of the projected $102.5 billion GST revenue for 2026-27, sparking criticism from NSW officials.
NSW Premier Criticizes Formula as Unfair
NSW Premier has described the latest GST calculation as “unfair” and “past its use-by date,” arguing that the formula penalizes the state despite its larger population and strong economic contribution.
The GST distribution system is designed to ensure that states and territories can provide a broadly comparable standard of government services, even though their fiscal capacities differ. However, the latest calculation has left NSW feeling shortchanged.
How the GST Split Works
The GST carve-up is based on a complex formula that takes into account population, revenue-raising capacity, and the ability to fund comparable services. States with lower fiscal capacity, like WA, often receive a higher per capita share to balance disparities.
Western Australia’s extra $5.5 billion reflects adjustments from a previous “sweetheart” deal, giving the state an edge over wealthier regions like NSW.
Implications for NSW
The reduction in NSW’s share relative to its population could have significant impacts on the state’s budget and public services. Critics argue that this creates inequities, as richer states like NSW continue to subsidize smaller or less populous regions.
The Premier has called for a review of the system, highlighting the need for a more transparent and fair approach to GST allocation that reflects current economic realities.
WA Benefits From Historical Deals
Western Australia’s windfall comes largely from arrangements struck in 2018, which continue to favor the state in the distribution formula. While designed to equalize funding and service provision across Australia, such deals are increasingly being criticized as outdated and unfair to larger, wealthier states.
Looking Ahead
As the debate over GST allocation intensifies, NSW is likely to push for reforms in the formula to ensure a fairer distribution. Meanwhile, other states will closely monitor allocations to assess whether the system continues to reflect population, economic capacity, and service needs.
The coming months may see increased political discussions and negotiations as states and territories seek to protect their fiscal interests ahead of the next financial year.
