Commonwealth Grants Commission Amendment (GST Distribution) Bill 2015

Monday 19 October 2015 @ 11.38 a.m. | Taxation

Last week on 13 October 2015, the Commonwealth Government introduced a new bill in the Senate instructing the Commonwealth Grants Commission (CGC) to take into account only the last financial year, especially in relation to Western Australian Mining, when preparing their annual recommendation on GST Distribution.

Background to the Bill

According to the Explanatory Memorandum, 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.

Amendments Contained in the Bill

According to the Second Reading Speech, this Bill establishes a new formula for the fairer assessment and distribution of GST and instructs the 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.

In particular, the Bill makes amendments to the Commonwealth Grants Commission Act 1973 (Cth) to add Section 16AB referring to Inquiries relating to the distribution of Goods and Services Tax revenue.

Further debate on the bill is expected when the Senate returns to Parliamentary session on 9 November 2015.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.

Sources:

Commonwealth Grants Commission Amendment (GST Distribution) Bill 2015 and secondary materials as reproduced on TimeBase LawOne

Related Articles: