Australia: Consultation on operation of 2018 GST reforms

The Productivity Commission released for consultation an issues paper on the operation of the federal government's 2018 goods and services tax (GST) reforms.

Background

The 2018 GST reforms changed the way GST revenue is distributed among the states to address concerns about the volatility of this revenue source by:

• Changing the equalization benchmark so that each state's relativity is at least as high as the relativity of the fiscally stronger of New South Wales or Victoria
• Providing an additional minimum GST revenue-sharing relativity (now 0.75)
• Requiring the GST pool to be “topped-up” by the Commonwealth into perpetuity, and for that “top-up” to grow at an indexed rate
• During a transition period of six years from 2021-22 to 2026-27, any state that received less than it would have received under the previous GST distribution system would be entitled to additional “no worse off” payments

Consultation

The consultation focuses on:

• The extent to which the current arrangements are delivering a reasonable level of horizontal fiscal equalization and are fiscally sustainable
• Whether alternative arrangements would better achieve some or all of these outcomes
• The interaction between GST payments and other Commonwealth payments to states, including the principles for exempting payments from the Commonwealth Grants Commission’s assessments

The consultation closes on February 27, 2026.

The Commission is expected to provide an interim report by August 28, 2026, and a final report by December 31, 2026.