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Part 3: Fiscal strategy and outlook (Continued)

Attachment D

Australia's Federal Relations (Continued)

GST and general revenue assistance

General revenue assistance is a broad category of payments that are provided to the States without conditions to spend according to their own budget priorities.

In 2012‑13, the States will receive $49.4 billion in general revenue assistance from the Commonwealth, comprising $48.3 billion in GST entitlements and $1.2 billion in other general revenue assistance. This is a 4.8 per cent increase in general revenue assistance, compared with the $47.1 billion the States received in 2011‑12. Total general revenue assistance to the States is estimated to represent 13.2 per cent of total Commonwealth expenditure in 2012‑13.

GST entitlement in 2012‑13 has been revised up by $50.0 million since Budget and by $675.0 million over the four years to 2015‑16.

Table 3.27 summarises GST and general revenue assistance payments to the States. Detailed tables of GST and general revenue assistance, including state shares of each payment, are provided in Annex A.

Table 3.27: GST and general revenue assistance, 2012-13 to 2015-16

$million	2012-13	2013-14	2014-15	2015-16
GST entitlement	48,250.0	51,000.0	53,700.0	56,400.0
Other payments
ACT municipal services	36.8	37.5	38.2	38.9
Reduced royalties	75.4	64.1	64.0	69.7
Royalties	994.7	963.1	955.5	956.2
Snowy Hydro Ltd tax compensation	74.4	74.4	74.4	74.4
Total other	1,181.3	1,139.1	1,132.0	1,139.2
Total GST and other payments	49,431.3	52,139.1	54,832.0	57,539.2

GST

GST revenue variations since the 2012‑13 Budget

Table 3.28 provides a reconciliation of the GST revenue estimates since the 2012‑13 Budget. The reconciliation accounts for policy decisions and parameter and other variations.

Table 3.28: Reconciliation of GST revenue estimates since 2012-13 Budget

$million	2012-13	2013-14	2014-15	2015-16
GST revenue at 2012-13 Budget	50,486	53,234	56,056	58,730
Changes between 2012-13 Budget and
MYEFO
Effect of policy decisions	8	39	74	74
Effect of parameter and other variations	296	457	460	626
Total variations	304	496	534	700
GST revenue at 2012-13 MYEFO	50,790	53,730	56,590	59,430

Specific policy decisions taken since Budget that affect GST revenue are shown in Table 3.29. These decisions increase the amount of GST revenue by $194.4 million over four years.

Detailed information on policy decisions since the 2012‑13 Budget are included in Appendix A.

Table 3.29: Policy decisions since Budget that affect GST revenue

$million	2012-13	2013-14	2014-15	2015-16
Commonwealth penalty unit – increase in value to reflect inflation	2.0	10.0	13.0	13.0
Customs' compliance assurance system – expansion	-	7.6	7.6	7.6
Fringe benefits tax – reform of living-away-from-home allowances and benefits	0.7	-	-	-
Fringe benefits tax – removal of concessional treatment of ‘in-house’ fringe benefits if accessed through a salary sacrifice arrangement	5.0	10.0	35.0	35.0
GST – restrictions on GST refunds – revisions and changed start date	-	..	6.0	6.0
Indirect Tax Concession Scheme – diplomatic and consular concessions	..	..	..	..
Tax compliance – maintaining the integrity of the tax and superannuation system	-	11.7	12.0	12.2
Tax laws – miscellaneous amendments	..	..	..	..
Total GST revenue policy decisions	7.7	39.3	73.6	73.8

Reconciling GST revenue and GST entitlements to the States

In accordance with the Intergovernmental Agreement, the Commonwealth administers the GST on behalf of the States and all GST revenue is paid to the States.

GST advances are paid during the relevant financial year and the Commonwealth Treasurer determines the level of GST receipts based on the final budget outcome. A balancing adjustment is made following the conclusion of the financial year to ensure that the States receive their full entitlement of GST payments.

In addition to this balancing adjustment, GST revenue for a financial year also varies from the amount of GST paid to the States for that year because of:

• accrual GST revenues where the cash amounts have not yet been remitted to the ATO;
• penalties, other than general interest charge penalties, which are not included in the definition in the Intergovernmental Agreement of GST to be paid to the States; and
• the net GST component of sales (and associated input tax credits) by Commonwealth agencies which has been collected by those agencies but which, as at 30 June in each year, will not have been remitted to (or refunded by) the ATO, because it is not due to be paid (or refunded) until the next Business Activity Statement is lodged.

The reconciliation of GST revenue and GST entitlements to the States is provided in Table 3.30.

Table 3.30: Reconciling GST revenue and GST entitlements to the States

	Outcome		Estimates
$million	2011-12		2012-13	2013-14	2014-15	2015-16
GST revenue	48,849		50,790	53,730	56,590	59,430
less change in GST receivables	2,987		2,358	2,541	2,690	2,819
GST receipts	45,861		48,432	51,189	53,900	56,611
less non-GIC penalties collected	165		180	190	200	210
less net GST collected by Commonwealth agencies but not yet remitted to the ATO	-343		2	-1	..	1
GST entitlements to the States	46,040		48,250	51,000	53,700	56,400

Table 3.31 below provides information on the balancing adjustment relating to 2011‑12 which will be paid in 2012‑13.

Table 3.31: Balancing adjustment relating to 2011‑12

$million	Total
GST entitlements to the States in 2011-12	46,040.1
less advances of GST revenues made throughout 2011-12	45,600.0
equals following year balancing adjustment	440.1

Distribution of GST entitlement pool among the States

As agreed by all parties in the Intergovernmental Agreement, GST payments are distributed among the States in accordance with the principle of horizontal fiscal equalisation and having regard to the recommendations of the Commonwealth Grants Commission. The calculations for the distribution of the GST pool in 2012‑13 are shown in Table 3.32.

Table 3.32: Distribution of the GST entitlement pool, 2012‑13

	Estimated 31 December 2012 population (1)	GST relativities (2)	Adjusted population (1) x (2) (3)	Share of adjusted population % (4)	2012-13 GST entitlement $million (5)
NSW	7,316,776	0.95312	6,973,766	30.6	14,774.5
VIC	5,669,647	0.92106	5,222,085	22.9	11,063.4
QLD	4,605,716	0.98477	4,535,571	19.9	9,609.0
WA	2,458,567	0.55105	1,354,793	5.9	2,870.2
SA	1,658,218	1.28472	2,130,346	9.4	4,513.3
TAS	513,830	1.58088	812,304	3.6	1,720.9
ACT	377,726	1.19757	452,353	2.0	958.3
NT	233,964	5.52818	1,293,395	5.7	2,740.2
Total	22,834,444	na	22,774,613	100.0	48,250.0

The calculations for the distribution of the 2011‑12 balancing adjustment are shown in Table 3.33. This adjustment will be paid to each State in 2012‑13 following the upwards revision to the States' 2011‑12 GST entitlement of $440.1 million.

Table 3.33: Distribution of the GST balancing adjustment, 2011‑12^(a)

	31 December 2011 population (1)	GST relativities (2)	Adjusted population (1) x (2) (3)	Share of adjusted population % (4)	2011-12 GST entitlement $million (5)	2011-12 GST advances $million (6)	Balancing adjustment $million (5) - (6) (7)
NSW	7,247,669	0.95776	6,941,527	30.9	14,231.9	14,104.9	127.0
VIC	5,574,455	0.90476	5,043,544	22.5	10,340.6	10,273.6	66.9
QLD	4,513,009	0.92861	4,190,825	18.7	8,592.3	8,600.7	-8.4
WA	2,387,232	0.71729	1,712,338	7.6	3,510.7	3,419.6	91.1
SA	1,645,040	1.27070	2,090,352	9.3	4,285.8	4,239.2	46.6
TAS	511,718	1.59942	818,452	3.6	1,678.0	1,643.4	34.7
ACT	370,729	1.11647	413,908	1.8	848.6	825.1	23.5
NT	232,365	5.35708	1,244,798	5.5	2,552.2	2,493.6	58.6
Total	22,482,217	na	22,455,744	100.0	46,040.1	45,600.0	440.1

(a) Total may not equal sum of State totals.

GST administration costs

Given that all GST revenue is provided to the States, the States compensate the Commonwealth for the agreed costs incurred by the ATO in administering the GST, as shown in Table 3.34.

Table 3.34: GST administration budget, 2011‑12 to 2015‑16

	Actual		Estimates
$million	2011-12		2012-13	2013-14	2014-15	2015-16
Australian Taxation Office budget	683.2		680.9	681.9	688.3	695.3
less prior year adjustment	5.9		-13.7
equals State government payments	677.4		694.7	681.9	688.3	695.3
less Australian Taxation Office outcome(a)	697.0
equals Commonwealth budget impact	-19.6
plus prior year adjustment	5.9
equals following year adjustment	-13.7

(a) Estimated outcome for 2011‑12 pending confirmation by the Australian National Audit Office.

The preliminary outcome for the 2011‑12 GST administration expenses of $697.0 million differs from the amount paid by the States and the prior year adjustment by $13.7 million. Once the outcome for GST administration in 2011‑12 is audited, the final adjustment will be incorporated into the States' administration costs for 2012‑13.

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