EXPLAINER: HOW THE GST COMPONENT WORKS

THE confusing parameters around the GST allocation for states and territories is making it difficult to understand why the Townsville City Deal funding release has been delayed.

States and territories are allocated a certain portion of the GST the federal government collects in order to provide the services its residents need.

This allocation has become a sticking point in the Townsville City Deal with the state government saying it would end up stumping up the cash for projects anyway.

The state government maintains that if the money was not quarantined, it would essentially be forced to pay for 80 per cent of the project again, on top of the money handed over by the federal government.

In an email seen by the Townsville Bulletin, the Commonwealth Grants Commission, who looks after states and territories’ GST allocation, confirmed this would only happen if one payment was considered in isolation.

Under the GST rules, there is no impact to the state’s allocation if the funding is for a local government project. However, it is a service that would otherwise be provided by the state government, the GST allocation is impacted.

If one state or territory receives more money than others, the GST allocation is adjusted to ensure there is an equal funding footing.

If the state government was only to keep 20 per cent of the Haughton Pipeline money allocated to eligible projects, Queensland would also need to have 20 per cent of Australia’s population and about 20 per cent of the national need for what is being funded.

If another state was to receive a grant from the commonwealth, Queensland’s GST value would increase by about 20 per cent of the grant value.

The CGC wrote in the correspondence seen the GST distribution could not be determined without considering all commonwealth payments to all states.