The New South Wales government has launched a formal campaign to dismantle Australia’s Goods and Services Tax (GST) distribution framework, labeling it fundamentally broken and unfair. This move follows the state’s receipt of its worst-ever share from the national tax pool, intensifying a long-standing fiscal feud among Australia’s states and territories.
Treasurer Daniel Mookhey revealed that NSW would submit a proposal to the Productivity Commission advocating for a complete overhaul. The core of the NSW argument centers on the controversial 2018 Morrison government reforms, which established a GST ‘floor.’ This mechanism ensured that mineral-rich Western Australia would receive no less than 75 cents per person for every dollar of GST collected from states like NSW and Victoria. This arrangement was recently extended by the Albanese government, a decision that safeguards approximately $6 billion in revenue for WA.
NSW contends that this system has cost its economy a staggering $8.6 billion over the past four years alone—funds it states could have allocated to employing over 14,000 teachers or 13,500 nurses. Under the most recent Commonwealth Grants Commission recommendation, Victoria received $1.4 billion more in GST revenue than NSW for the upcoming period.
The proposed NSW solution is a shift to an equal per capita distribution of GST grants. This would see funds allocated purely based on population share, with the federal government using its own budget to provide ‘top-up’ payments to smaller jurisdictions like the Australian Capital Territory, Tasmania, and the Northern Territory, ensuring they are no worse off. Mookhey argued this would relieve NSW from ‘carrying the federation all by itself.’
As a potential compromise, NSW has also proposed a return to a modified pre-2018 system by 2030-31 if a consensus cannot be reached on the per capita model. This modified system would feature a lower floor of 50 cents per dollar and require the Commission to provide four-year relativity forecasts for greater transparency. While every state and territory except Western Australia has reportedly criticized the current model, WA Premier Roger Cook’s government remains a staunch defender of the 2018 arrangements that have significantly benefited its budget.









