Each year, the Commonwealth Treasurer asks the Commission to provide recommendations for the distribution of the Goods and Services Tax (GST) pool among the states and territories (states). The objective is to provide states with a similar fiscal capacity to provide services to their communities.
States’ economic, social and demographic characteristics differ, and this affects their revenue-raising capacities and the expenditure needed to provide services. Drivers of differences in states’ revenue capacities include mineral royalties, land values, property transactions and payroll taxes. Expenditure needs differ for reasons such as socio-demographic characteristics, wage pressures, and rates of population growth. States also receive different levels of Commonwealth payments. Where these payments affect the revenue available for state service delivery, the Commission takes them into account when assessing GST needs.
This paper provides an overview of each state’s GST needs over the past decade, and the main reasons for changes. The box on page 3 provides definitions for key terms used throughout the paper.