Demand for urgent change to GST 'atrocity' rebuffed

A renewed push for urgent GST changes has been rebuffed by the federal government after Victoria branded the system an affront to decency.

Victorian Labor Treasurer Tim Pallas is demanding the Albanese Labor government make the "no worse off" GST guarantee permanent, so states and territories can have financial certainty over their budget forward estimates.

"The way the GST is currently being applied is an affront to decency. It, quite frankly, is a ridiculous distortion put in place by the previous Morrison government," he told reporters on Tuesday.

Mr Pallas and NSW Treasurer Matt Kean last year called for a scheduled review of the GST formula to be brought forward but it was knocked back by then-federal coalition treasurer Josh Frydenberg.

Under the transition to the new formula legislated in 2018, the GST share for states cannot fall below a minimum per person. 

The floor was set at 70 cents per dollar for 2022/23 and 2023/24, rising to 75 cents from 2024/25.  

But payments made by the Commonwealth outside of a GST pool when the floor is activated are due to end when the "no worse off" guarantee expires in 2026/27.

In 2016/17, WA received an all-time low of 30 cents for every GST dollar raised in the state but is guaranteed 70 cents to the dollar under the current floor price.

In a report published on Tuesday, the Commonwealth Grants Commission flagged "no worse off" payments in 2023/24 would increase for every state and territory except WA.

WA will receive $5.6 billion more in GST revenue next financial year than it would have under the old system. 

"Our solution in a perfect sense was to get rid of the atrocity that is the floor price on Western Australia," Mr Pallas said.

"In an effort to keep everybody essentially united in our position what Victoria has proposed and all states have agreed to is that the Commonwealth continue to pay for their public policy intervention." 

Last year, Prime Minister Anthony Albanese assured WA Premier Mark McGowan he would not change the distribution of the tax.

Victorian Premier Daniel Andrews said he had not spoken to Mr Albanese recently about possible GST changes, adding Victoria would not "stand for" being worse off than WA.

"You want to do a sweetheart deal for WA, that's fine if that's your choice," he said.

"But you have been compensating us for that and you need to keep compensating us for that. It's not even compensation; it's just fairness."

Federal Treasurer Jim Chalmers said the GST floor was a $5.6 billion "thank-you" to WA for keeping the wheels of the national economy turning.

He wouldn't be drawn on whether the "no worse off" guarantee would continue beyond 2026/27, declaring a review was years away.

"We'll consider that at the appropriate time," Dr Chalmers said in Rockingham alongside WA's Defence Industry Minister Paul Papalia.

"But what's not under consideration ... is the GST floor here in Western Australia."

With Victoria's net debt forecast to hit $165.9b by mid-2026, Mr Papalia encouraged those outside of WA to focus on budget management and stay away from its GST.

The Productivity Commission is scheduled to report on the implications of the 2018 GST reforms by the end of 2026. 

ESTIMATED "NO WORSE OFF" PAYMENTS FOR 2023/24

* NSW - $1.72b

* Victoria - $1.43b

* Queensland - $1.12b

* Western Australia - $0

* South Australia - $373m

* Tasmania - $113m

* ACT - $96m

* Northern Territory - $37m