Our tax system

The GST and state taxes

As with most federations around the world, State and Territory governments in Australia (including local governments) spend more than they raise in revenue. The difference is made up by grants from the Australian Government.

The States and Territories receive all revenue raised by the GST. About 23 per cent of total state revenue comes from the GST, with state‑levied taxes generating about 31 per cent of total state revenue. The GST is relatively efficient compared to some other taxes because it has a much broader base than many other taxes. However, exemptions reduce its efficiency and introduce significant complexity. In total, around 47 per cent of Australia’s national consumption is subject to GST.

Legislation requires that changes to the GST base or rate require unanimous agreement by all State and Territory governments, as well as both houses of the Australian Parliament. The Australian Government will not support changes to the GST without a broad political consensus for change, including agreement by all State and Territory governments.

The major sources of state tax revenue are payroll taxes and stamp duties. State governments also impose taxes on land, gambling and motor vehicles. Municipal rates are the sole source of local government tax revenue.

Some studies suggest significant economic gains from state tax reform, particularly reduced stamp duties and greater use of payroll and land taxes.

See the discussion paper for more information.


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