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Budget deals alarming GST blow to SA budget

Estimated combined cut of $687m over two years

The South Australian Council of Social Service has expressed alarm today at the further cuts to South Australia’s GST entitlements in last night’s Federal Budget, a cut which will almost certainly have dire consequences for the State Government’s own budget.

SACOSS is calling on the State Government to urgently look at state revenue measures, which will address this new revenue hole which threatens their ability to fund vital services.

The Federal Budget revealed a cut of $99m to South Australia’s GST share this year, and a cut of $187m in 2019-20. This is in addition to the cuts of $72m and $328m announced recently by the Commonwealth Grants Commission (which regulates the GST sharing formula). Together, this is a cut of $687m over two years to our State Budget from the estimates made in the mid-year budget review just 4 months ago.

Ross Womersley, CEO of SACOSS said:

“We are deeply concerned about the implications of the GST cuts on the South Australian budget.”

“These cuts will make it increasingly difficult for the South Australian government to deliver vital services to the South Australian community. These services are vital to all South Australians, but most particularly to vulnerable and disadvantaged people who rely on these services to survive.”

“GST rose from 26.1% of state revenue in 2009-10 to a planned 35.2% in the 2018-19 budget, but these dramatic changes confirm our fears that GST is a poor substitute for a solid state tax base. We again call on the state government to look at revenue measures to stabilise the SA State Budget.”

As a start, SACOSS is proposing two revenue options:

  • Changing the aggregation arrangements on land tax to mirror NSW and Victorian systems, as identified in the 2015 State Tax Review. This would basically close a loophole that allows landowners with multiple properties to organise their property ownership to minimise tax (see attached briefing note) and would net the State Budget in the region of $30m per annum.
  • Reversing or delaying the changes to land tax announced in the last budget which have not yet been commenced. This would see the tax free threshold remain at $369,000 (rather than rising to $450,000) and the top tax rate commencing at $1,231m – rather than the proposed $5m. This would claw back $44.4m in 2019-20 budget year without increasing anyone’s tax (as the budget changes are not in effect yet).

Ross Womersley concluded:

“At the end of the day, what we really need is an acknowledgement from the state government that will adopt revenue measures to address the State Budget issues and not simply slash services which will impact most on our state’s most vulnerable people.”

Published Date: 
Wednesday, 3 April 2019