Productivity Commission launches inquiry into GST distribution reforms

On Monday (29 September), the Productivity Commission (PC) announced it would commence its scheduled review into the 2018 GST distribution reforms, shortly after the Treasury released its terms of reference.

The PC invited individuals and organisations to provide submissions to the inquiry via their website, noting that initial submissions were due by 27 February 2026. The commission is scheduled to publish an issues paper in November 2025 to assist stakeholders in preparing their submissions.

The commission’s interim report on the matter is due in August 2026, and the final report in December 2026.

“The Productivity Commission Inquiry will look at ways in which the federal financial relations system can best promote fiscal sustainability across the states and territories and the Commonwealth,” Treasurer Jim Chalmers said last Wednesday (24 September), when the Treasury released its terms of reference.

“The PC will investigate whether the current arrangements are working efficiently, effectively and as intended, while being cognisant of the Commonwealth’s policy commitments in relation to GST distribution, and with Terms of Reference that are deliberately broad enough to enable it to look into issues raised by states and territories.”

In 2018, Parliament legislated changes to the GST revenue distribution process to ensure that each state got to keep at least 75 cents for every dollar of GST revenue it raised. This followed concerns from the WA government that it wasn’t getting a fair GST deal.

The change stipulated that the Commonwealth government would “top up” the GST pool to ensure that no state or territory would be worse off than it would have been prior to the deal.

The 2018 deal is projected to cost the Commonwealth $21.8 billion from 2025–26 to 2028–29 in equalisation payments to make up revenue shortfalls in states other than Western Australia. Federal estimates have indicated that it’s on track to cost the federal budget $60 billion over the 11 years to 2029.

Last Wednesday, deputy premier of Western Australia Rita Saffioti said the WA Labor government would fight to ensure the 2018 reforms were retained.

“Our government is unwavering in its commitment to maintaining a fair share of GST for Western Australia. We will be fighting extremely hard throughout this Productivity Commission review period to ensure that the 2018 GST reforms remain intact,” Saffiotti said in a release.

“We know that the Albanese government is acutely aware and has supported maintaining the 2018 reforms, but we also know there are many on the east coast advocating for the reforms to be removed. We can’t allow those critical voices to shape the debate.”