Australia’s $23B GST Deal With Western Australia Under Review
Synopsis
The Productivity Commission is pushing to unwind the 2018 GST reforms, saying the Morrison-era agreement has imposed billions in costs and produced inequitable outcomes.
Australia’s Western Australia GST deal is in trouble as the Productivity Commission released a report that the reforms made in 2018 have cost the Commonwealth over $23 billion as of 2024-25. In other words, the amount turned out to be higher than estimated.
The commission’s report titled ‘GST Distribution Reforms Interim Report’ that was presented on August 14 suggests that the reforms have worked efficiently for the State and the distribution scheme was unfair.
The report describes how the system in Western Australia has changed, as well as notes the current situation.
How the GST arrangement changed
The Western Australia GST deal emerged as a result of the State’s decreasing GST revenues due to the mining boom. The 2018 reforms established a minimum threshold to ensure that no State has a lower per-capita allocation of GST than the more generous of the two comparative States, New South Wales and Victoria.
The other states and territories are compensated for the changes in the distribution system, with the so-called Commonwealth No Worse Off payments, to offset any revenue losses.
According to the Productivity Commission, such payments summed up to $6.4 billion in 2024–25. If iron ore prices or production rises, the annual cost could be up to $12 billion, the commission reported. The GST pool is about $100 billion per annum, with a distribution to the states and territories based on their relative capacity to raise funds and deliver government services.
The commission noted that the 2018 distribution reforms substantially reduced revenue variability for Western Australia and will mainly be borne by the Commonwealth.
WA’s mining economy remains central
The WA GST deal is deeply intertwined with the resource-rich state’s budget as the mining revenue boom determines the state’s GST revenue.
The report by the Productivity Commission identified a dominant-state effect, whereby a single state’s GST figures weigh on the distributional formula, in this case, Western Australia. In its report, the commission highlighted that mining accruals were a matter of concern.
The state’s GST revenue in 2024-25 is, on average, 113 per cent of the fiscal year’s estimated needs, while for the other states and territories; it is 98 percent of their estimated requirements. Thus, the deviation observed in Western Australia demonstrates how different the state’s figures can be from the other states’ numbers, according to the report.
The Productivity Commission recommended restoring the status quo ante with modifications to account for the impact of the mining sector on the state’s revenue. The final report is expected to be published by the end of 2026.
Source: The Guardian
Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
