NSW to receive $1.5 billion less than Victoria despite larger population
Updated ,first published
The Albanian government is under pressure to improve the way the GST is split between states after the latest split left NSW with $1.5 billion less in the national pool than Victoria, despite having around 1.5 million more people.
Independent Commonwealth Grants CommissionThe body, which oversees how the $103 billion GST pot is allocated, said every state and territory will receive more GST in 2026-27 than in the previous year due to the estimated increase in overall GST revenue.
Western Australia was the big winner from the latest distribution; Even though it is the strongest state financially, its share in GST will increase from 8.3 percent to 9.1 percent.
Queensland will receive the biggest dollar increase in its $1.7 billion GST rollout.
But NSW will see its share of the GST fall to just 25.5 per cent of the national pool, despite the state making up about 31 per cent of Australia’s population. The commission said one reason for the reduced share was “above-average growth in land values” in NSW, which meant it had the capacity to raise more land tax revenue than other states. NSW also spent less on natural disaster relief than previously expected.
Victoria’s share of GST has fallen slightly but will still receive $1.5 billion more in 2026-27 than the previous year.
Victoria’s allocation for next year ($27.9 billion) will be around $1.7 billion more than NSW ($26.2 billion), despite its lower population.
State treasurers from NSW and Queensland reacted angrily to the commission’s recommendations.
NSW Treasurer Courtney Houssos said the proposed split showed the GST system was “broken and unfair” and called for urgent reform.
“This decision once again demonstrates the need for fairer allocation in how GST is distributed across states and territories,” he said.
“We will continue to engage with the Commonwealth and work towards a more transparent system that can deliver our fair share to NSW.”
Queensland Treasurer David Janetzki said his state was “flawed” over its latest GST allocation and also called for an overhaul of the model.
He said while the state’s headline share was increasing, it was an unbalanced allocation from the national pool.
Janetzki noted that although the national GST pool has increased by 20 per cent over the past three years, Queensland is the only region allocated less in this round than in 2023-24.
“Queensland must get its fair share of the GST pie, not play second fiddle to a second-rate delivery model designed to deceive us,” he said.
GST is the single largest source of revenue for state governments; This means that the Commonwealth’s tax distribution has a significant impact on state budget balances.
The Commonwealth Grants Commission uses a complex method to determine how the GST pool should be divided between the states. It aims to ensure that all states have equal capacity to provide services to their populations. Smaller states have traditionally received more GST per capita than larger states.
However, economists have criticized the commission’s GST distribution method as overly complex and lacking in transparency.
The Morrison government’s agreement to maintain Western Australia’s share of GST, which fell due to rising iron ore prices in the 2010s, also sparked reaction from budget experts.
This revision in 2019 significantly changed the way the GST was divided and required the introduction of a “no worse off” provision for states; This currently costs federal taxpayers billions of dollars each year.
The Federal Productivity Commission is currently examining how the GST is shared between states; Its interim review will be published in November.
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Matt Wade is senior economics writer at The Sydney Morning Herald.Connect with: X or email.
James Hall is News Director of the Brisbane Times. He is a former Queensland correspondent for The Australian Financial Review and has covered a variety of headlines across the country, specializing in political and financial reporting.Connect with: X or email.
