PERTH (miningweekly.com) – The Australian resources sector has welcomed the federal government’s announcement of an eight-year, three-step plan to update the way the Goods and Services Tax (GST) is redistributed.
“Our preferred model involves moving to a new benchmark that will ensure the fiscal capacity of all states and territories is at least the equal of New South Wales or Victoria (whichever is higher),” Treasurer Scott Morrison said on Thursday.
“Benchmarking all states and territories to the economies of the two largest states will remove the effects of extreme circumstances, like the mining boom, from Australia's GST distribution system.”
In addition to moving to a new, more stable equalisation standard, the government also proposes to commit to put in place a 'floor' on the relativity any state can receive.
Morrison said that the government would implement a floor of 70c a person for each dollar of GST, below which no state's relativity can fall, from 2022/23, rising to 75c from 2024/25.
“Given the formula is now based on a more stable benchmark, it is highly unlikely relativities would move below the new floor,” he said.
The Association of Mining and Exploration Companies (Amec) said that the proposed changes to the distribution of GST would reduce the pressure on state and territory Budgets and would remove the need to adjust royalties and the indirect taxes, such as stamp duty and payroll tax.
“Today’s proposal should mean no Australian state or territory is disadvantaged for encouraging the development of the mining and mineral exploration industry,” said Amec CEO Warren Pearce.
In the past, Western Australia in particular, has been disadvantaged by the GST horizontal fiscal equalisation (HFE) formula redistributing the sizeable royalty receipts from Western Australia’s world leading mining sector to other states.
“This announcement provides certainty for state and territory governments, certainty on a major budget item, and reduces a substantial disincentive for governments to encourage the investment in Australia’s mineral resources.”
Pearce said that the eight-year timeframe provided a window for states and territories to revisit indirect taxes and look to broader reforms to reduce the cost of doing business.
“The HFE reform is positive for the sector, and we call on state and territory governments to support a more equitable redistribution of the GST in the national interest,” said Pearce.
The Western Australian Chamber of Minerals and Energy (CME) also welcomed the GST reform, with incoming CEO Paul Everingham saying the 70c-a-person floor would deliver a A$1.4-billion windfall to Western Australia’s yearly GST allocation over the next two years.
“CME welcomes today’s announcement by the government as the reforms will ensure those states who move forward to develop their own economies will not be punished with less GST as a result of their success.
“The reforms will also ensure while the relativity floor is being established no state will be financially disadvantaged,” Everingham said.