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2013-2014-2015
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
COMMONWEALTH GRANTS COMMISSION AMENDMENT (GST
DISTRIBUTION) BILL 2015
EXPLANATORY MEMORANDUM
(Circulated by authority of Senator Wang)
COMMONWEALTH GRANTS COMMISSION AMENDMENT (GST
DISTRIBUTION) BILL 2015
OUTLINE
The Bill instructs the Commonwealth Grants Commission (CGC) in preparing its annual
recommendation on GST distribution when considering mining revenue to only take into
account the most recent completed financial year data available. The Bill makes no other
change to the assessment and distribution of GST revenue to the States.
The issue of the volatility of mining revenue has been raised in Commonwealth Grants
Commission reviews of the GST distribution process for over ten years now. The issue is of
particular importance to the Western Australian Government and to a lesser extent the
Queensland Government.
On the 23rd December 2014, the then Treasurer, Mr Joe Hockey, wrote to the Chairperson of
the Commonwealth Grants Commission and asked that it examine the issue of mining
revenue volatility and to provide advice. In keeping with CGC response to the issue over
many years the formulae suggested are complex and raise other problems. The failure to
effectively and in timely order to deal with the fundamental concern to the two states placed
at most disadvantage by the current assessment of mining royalties has led to the introduction
of this Bill.
There has been some commentary to the effect that using annual assessment of royalty
revenue will disadvantage the mining states when these royalties are increasing. This position
shows a lack of understanding of the current negative impact in particular experienced by
Western Australia. As the table at attachment A shows, using three years and therefore aged
mining revenue data drives a huge reduction in GST distribution to Western Australia at the
same time that the actual mining royalty is reduced. The more sensible treatment proposed in
this Bill will preserve GST distribution when this coincides with royalty reduction and will
allow the GST to reduce as royalties rise.
The table (attachment A) prepared by the Parliamentary Budget Office at the request of
Senator Wang shows the "no change base case". It also shows the revenue changes brought in
by this Bill.
The relativities line shows cents in the dollar per capita of GST revenue received under both
formulas for all States and Territories covered by the distribution formula. An equal per
capita distribution would show a distribution number of 1(one) for all states and territories.
The principle of horizontal fiscal equalisation (HFE) is fundamental to the agreement and
formula; and remains intact with the measures proposed by this Bill.
NOTES ON CLAUSES
Clause 1: Short Title
1. Clause 1 is a formal provision specifying the short title of the Bill.
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Clause 2: Commencement
2. The Bill will commence the day after it receives Royal Assent.
Clause 3 - Schedules
4. Each Act specified in a Schedule to this Act is amended or repealed as is set out in the
applicable items in the Schedule. Any other item in a Schedule to this Act has effect
according to its terms.
Schedule 1--Amendments
Commonwealth Grants Commission Act 1973
Item 1 - Section 16AB
5. This item inserts section 16AB into the Commonwealth Grants Commission Act 1973.
The amendment relates to the consideration of mining revenue made by states and
territories. It requires that if the CGC conducts an inquiry into the states or territories
relating to distributing the GST revenue, and the CGC considers the mining revenue
of a State or a Territory in doing so, the CGC can only take into account the mining
revenue for the most recent financial year for which data is available.
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Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Commonwealth Grants Commission Amendment (GST Distribution) Bill 2015
This Bill is compatible with the human rights and freedoms recognised or declared in the
international instruments listed in Section 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Overview of the Bill
This Bill establishes a new formula for the fairer assessment and distribution of General
Services Tax (GST).
Human rights implications
This Bill does not engage any of the applicable rights or freedoms.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
Senator Wang
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Attachment A
NSW Victoria QLD WA SA Tasmania ACT NT
2011-12
No change base Relativities 0.958 0.905 0.929 0.717 1.271 1.599 1.116 5.357
case
GST 15,440 11,257 9,476 3,728 4,631 1,795 894 2,779
distribution
($m)
Including Relativities 0.917 0.829 1.015 1.006 1.184 1.472 1.013 5.025
mining royalty
income earned
by state and Change in -681 -959 868 1,496 -321 -145 -84 -175
territory GST
governments distribution
based on a ($m)
single most
recent historical
financial year
2012-13
No change base Relativities 0.953 0.922 0.985 0.551 1.285 1.582 1.180 5.527
case
GST 15,654 11,723 10,271 2,941 4,772 1,808 973 2,910
distribution
($m)
Including Relativities 0.910 0.834 1.078 0.880 1.188 1.446 1.065 5.120
mining royalty
income earned
by state and Change in -739 -1.129 955 1,749 -364 -157 -96 -219
territory GST
governments distribution
based on a ($m)
single most
recent historical
financial year
2013-14
No change base Relativities 0.966 0.904 1.056 0.446 1.262 1.615 1.221 5.314
case
GST 15,748 11,507 10,958 2,491 4,656 1,839 1,037 2,763
distribution
($m)
Including Relativities 0.915 0.817 1.100 0.877 1.172 1.489 1.101 4.924
mining royalty
income earned
by state and Change in -875 -1.133 421 2,395 -345 -148 -104 -209
territory GST
governments distribution
based on a ($m)
single most
recent historical
financial year
2014-15
No change base Relativities 0.975 0.883 1.079 0.376 1.288 1.635 1.236 5.661
case
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GST 16,416 11,585 11,554 2,215 4,874 1,881 1,090 3,086
distribution
($m)
Including Relativities 0.913 0.783 1.121 0.899 1.188 1.479 1.090 5.136
mining royalty
income earned
by state and Change in -1,109 -1,345 407 3,057 -395 -186 -132 -297
territory GST
governments distribution
based on a ($m)
single most
recent historical
financial year
2015-16
No change base Relativities 0.947 0.893 1.128 0.300 1.359 1.819 1.100 5.570
case
GST 17,311 12,755 13,046 1,935 5,525 2,236 1,040 3,350
distribution
($m)
Including Relativities 0.891 0.793 1.147 0.845 1.254 1.638 0.975 5.016
mining royalty
income earned Change in -1,087 -1,455 181 3,500 -444 -229 -121 -344
by state and GST
territory distribution
governments ($m)
based on a
single most
recent historical
financial year
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