Taxpayers forking out $6.6bn under controversial GST deal

The Albanese government will fork out an estimated $6.6bn to the states and territories under controversial GST reforms that have Western Australia booming.

The Commonwealth Grants Commission on Friday released its recommendations for the GST share in the 2026-27 financial year.

In total, the GST pool was estimated to increase in the forthcoming financial year from about $97bn to $103bn.

However, as a result of 2018 GST reforms, the federal government will spend an estimated $6.6bn on “no worse off payments” and GST pool top-up payments.

The reforms resulted in the introduction of a GST “floor”, ensuring Western Australia receives the same per person share of GST as the “standard state” – NSW or Victoria – without which the WA government estimates it would lose about $6bn.

Before “no worse off payments” – a commonwealth payment ensuring no state is worse off than before 2018 – all states other than Western Australia were estimated to receive less than under the previous GST distribution arrangements.

In 2026-27, Western Australia stood to earn an additional $1.3bn over last year’s carve-up, bringing its share to a whopping $9.3bn.

“The above-average revenue raising capacity of Western Australia outweighs its above-average cost of providing services,” the Commission said.

“It therefore receives a per person GST distribution below the national average.

However, a 2018 legislated GST floor meant WA’s share was “equal to the standard state of NSW (0.82)”, the Commission said.

NSW, Australia’s most populous state, is projected to receive only an additional $316m over 2025-26, with a share of $26.1bn.

The commission noted NSW delivered government services at rates below the national average, with only 5 per cent of the population living in remote or regional areas, compared to a national average of 9.8 per cent.

A significant “downward revision” of NSW’s natural disaster relief expenditure needs also decreased GST allocation, the commission noted.

Victoria’s GST share will also increase by $1.4bn to $27.9bn, while Queensland’s share – which fell in 2025-26 – will increase by $1.68bn,the biggest of any state, to $18.4bn.

The commission noted Queensland’s GST share was more significantly reduced in 2026-27 than in 2025-26 under the 2018 legislative amendments; however, in doing so, “no worse off payments” increased.

The Sunshine State’s GST needs increased in 2025-26 and 2026-27 due in part to decreased capacity to raise mining royalties following a dip in coal prices, the commission said.

Above-average wage growth and above-average growth in taxable payroll values also had an impact.

Elsewhere, South Australia’s GST share is expected to climb by $343m to $9.5bn and Tasmania’s by $286m to $4bn.

In the territories, the ACT will rake in $110m more for a total share of $2.1bn, while the Northern Territory will get $389m more to a total of $5.1bn.

Need for ‘fairer’ system

NSW was one of the first states to come out in opposition to Friday’s announcement.

The Labor government noted NSW would received as a result its lowest GST per person share since the GST was introduced in 2000.

In doing so, Australia’s largest state would be left with $1.4bn less GST revenue in 2026-27 than Victoria, despite having 1.5 million more people, the government said.

“This decision again demonstrates the need for a fairer allocation of how the GST is distributed across the states and territories,” NSW Acting Treasurer Courtney Houssos said.

“Successive NSW governments have identified the need for reform. We will continue to engage with the commonwealth and work towards a more transparent system which can deliver NSW our fair share.”

The Commonwealth Grants Commission is responsible for determining each state’s share of GST revenue, based predominantly on how much each state raises, as well as how much it costs for those states to deliver public services.

The commission then advises government.

Australia’s eastern and most populous states have for years urged for a rethink of the carve-up, with Western Australia walking away last year with about $6bn more.

That was due in large part to a GST “floor” introduced in 2018, under which WA receives a guaranteed 75c per dollar of GST revenue.

In 2025, Queensland’s share of GST was tipped to fall by $1.2bn, while Victoria’s was expected to increase by only $3.7bn.

Queensland Premier David Crisafulli last month said it would be “pretty aggressive” if Queensland “got done over again”.

“Because it was a really big whack for us,” he said.

Last year, NSW Treasurer Daniel Mookhey said NSW was “carrying the federation” on GST and urged for reform.

The WA government has lobbied to keep the current GST arrangements in place.

In a February statement, the Labor government said the post-2018 system was “fairer”, with WA still receiving the lowest share of GST of any state.

The Productivity Commission is also undergoing a mandated review of the GST distribution, which will probe WA’s share.

An interim report is due on August 28, with a final report by the end of the year.

The Commonwealth Grants Commission, in a submission to the Productivity Commission released on Friday, said some criticisms of arrangements were “based on misconceptions”.

“Criticism that a state that receives less than its population share of the GST pool is being ‘short-changed’ is inconsistent with the objective of fiscal equalisation,” it said.

The commission noted the objective of GST distribution was a “matter for government”.

“Historically, the system has been targeted at horizontal fiscal equalisation, whether that be ‘full’ equalisation (pre-2018 reforms) or ‘reasonable’ equalisation (post-2018 reforms),” the commission said, referring to the aim of equalising the ability to deliver services regardless of revenue raising.

“The objective of the GST distribution system will determine the design and implementation approach.

“The objective needs to be consistent with the GST’s role within the broader federal financial relations system.”