The New South Wales Government is calling for changes to the way the Goods and Services Tax is distributed, following a decision that has delivered the state its lowest share on record.
According to the Commonwealth Grants Commission, NSW will receive 82 cents in the dollar in 2026–27, down from 86 cents in the previous year and 92.4 cents in 2023–24. The state says this shift will leave it with around $1.4 billion less in GST revenue than Victoria, despite having a larger population.
Treasury figures cited by the government suggest the changing relativity has cost NSW an estimated $8.6 billion over the past four years. Officials argue that funding could have supported thousands more frontline workers, including nurses and teachers.
The NSW Government has put forward proposals to the Productivity Commission aimed at revisiting how GST funds are allocated across the country. One option would see GST distributed on an equal per capita basis, with additional top-ups funded by the Australian Government outside the GST pool.
Proponents of the change say this approach would simplify the system and provide greater clarity for state budgets, while also addressing what they describe as uneven outcomes under the current model.
If GST were distributed equally per person, NSW estimates it would receive an additional $3.2 billion in the next financial year. Supporters of the proposal also argue it would reduce administrative complexity and provide a more consistent basis for long-term planning.
Alongside the primary proposal, the state has also outlined a fallback option that would see a return to pre-2018 arrangements, with adjustments. These include a lower safety net floor for relativities and the introduction of longer-term forecasts from the Commonwealth Grants Commission to give states earlier visibility of potential changes.
NSW Treasurer Daniel Mookhey said the current approach places an uneven burden on the state and argued for a system that better reflects population share, while allowing the federal government to support smaller jurisdictions through its broader fiscal capacity.
He said the existing distribution has led to situations where NSW contributes more towards supporting other states and territories than its own services, a point the government is using to build its case for reform.
The proposal forms part of an ongoing national discussion about how GST revenue should be shared, with varying views among states and territories. While NSW is advocating for change, reaching agreement will depend on broader support across the federation.
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