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States to receive funding boost to meet their responsibilities for local Government

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M e d i a

R e l e a s eTHE HON ALEX SOMLYAY MR Minister for Regional Development, Territories and l/ocai Government


The Local Government Minister, Alex Somlyay, has welcomed the new tax system announced by the Treasurer today as providing an historic opportunity to reshape Commonwealth, State and local government financial relations.

An essential part of the new tax system is that State and Territory governments will receive all revenues raised by the new goods and services tax (GST). This will provide the States with a stable and growing source of revenue, conditional upon the States abolishing inefficient taxes and not re-introducing them. Annual financial assistance grants from the Commonwealth will be abolished.

The States, better resourced through the new tax system, will be able to take responsibility for the payments of general purpose assistance to local government currently made by the Commonwealth.

The Commonwealth will make the payment of GST revenue to the States conditional upon the States agreeing to make these payments in accordance with existing conditions, including the payment of a local roads component.

The payment of GST revenue will also be conditional upon the maintenance of growth in general purpose assistance to local councils on a real per capita basis, in accordance with the current arrangements.

These arrangements will be clearer and simpler than current funding arrangements and will ensure that the financial position of local councils is preserved.

In addition, the reduction in the costs of government resulting from the replacement of the wholesales sales tax with a GST, and the fact that local government rates will be GST-free, means that local government will benefit from tax reform. Councils will be able to recover the GST they pay on their inputs and benefit by around $70 million each year by not paying wholesale sales tax and other embedded taxes such as Financial Institutions Duty and debits tax.

Ends S82/98 13 August 1998

For further Information: Graeme Hallett, Media Adviser, 0419 218 469

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