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Commonwealth Grants Commission Amendment (GST Distribution) Bill 2015

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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 23 rd 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.



 

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.

 



 

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



 

Attachment A

 

 

NSW

Victoria

QLD

WA

SA

Tasmania

ACT

NT

2011-12

 

 

 

 

 

 

 

 

 

No change base case

Relativities

 

 

0.958

0.905

0.929

0.717

1.271

1.599

1.116

5.357

GST distribution ($m)

15,440

11,257

9,476

3,728

4,631

1,795

894

2,779

Including mining royalty income earned by state and territory governments based on a single most recent historical financial year

Relativities

 

 

0.917

0.829

1.015

1.006

1.184

1.472

1.013

5.025

Change in GST distribution ($m)

-681

-959

868

1,496

-321

-145

-84

-175

2012-13

 

 

 

 

 

 

 

 

 

No change base case

Relativities

 

 

0.953

0.922

0.985

0.551

1.285

1.582

1.180

5.527

GST distribution

($m)

 

15,654

11,723

10,271

2,941

4,772

1,808

973

2,910

Including mining royalty income earned by state and territory governments based on a single most recent historical financial year

Relativities

 

 

0.910

0.834

1.078

0.880

1.188

1.446

1.065

5.120

Change in GST distribution ($m)

-739

-1.129

955

1,749

-364

-157

-96

-219

2013-14

 

 

 

 

 

 

 

 

 

No change base case

Relativities

 

 

0.966

0.904

1.056

0.446

1.262

1.615

1.221

5.314

GST distribution ($m)

15,748

11,507

10,958

2,491

4,656

1,839

1,037

2,763

Including mining royalty income earned by state and territory governments based on a single most recent historical financial year

Relativities

 

 

0.915

0.817

1.100

0.877

1.172

1.489

1.101

4.924

Change in GST distribution ($m)

-875

-1.133

421

2,395

-345

-148

-104

-209

2014-15

 

 

 

 

 

 

 

 

 

No change base case

Relativities

 

 

0.975

0.883

1.079

0.376

1.288

1.635

1.236

5.661

GST distribution ($m)

16,416

11,585

11,554

2,215

4,874

1,881

1,090

3,086

Including mining royalty income earned by state and territory governments based on a single most recent historical financial year

Relativities

 

 

0.913

0.783

1.121

0.899

1.188

1.479

1.090

5.136

Change in GST distribution ($m)

-1,109

-1,345

407

3,057

-395

-186

-132

-297

2015-16

 

 

 

 

 

 

 

 

 

No change base case

Relativities

 

 

0.947

0.893

1.128

0.300

1.359

1.819

1.100

5.570

GST distribution ($m)

17,311

12,755

13,046

1,935

5,525

2,236

1,040

3,350

Including mining royalty income earned by state and territory governments based on a single most recent historical financial year

Relativities

 

0.891

0.793

1.147

0.845

1.254

1.638

0.975

5.016

Change in GST distribution ($m)

-1,087

-1,455

181

3,500

-444

-229

-121

-344