Western Australia’s $60 Billion GST Deal Under Review: What It Means for States and Businesses in 2025

On September 25, 2025, Federal Treasurer Jim Chalmers announced a Productivity Commission review of Western Australia’s controversial $60 billion GST arrangement. The deal, originally struck in 2018, guaranteed WA a higher share of GST revenue compared to other states. Now, with growing fiscal pressures across the federation, the arrangement is back under scrutiny. In this article, we’ll explore the background of the deal, why the review matters, and the potential implications for states, businesses, and taxpayers.

This review comes at a critical time, as Australia faces slowing economic growth, rising health costs, and pressure on federal and state budgets. Understanding this debate is essential for business leaders, policy advisors, and households alike.

Background: Why WA’s GST Deal Has Been Controversial

Origins of the 2018 WA GST Deal

In 2018, the Morrison government introduced reforms to the GST distribution system after WA complained of receiving less than 30 cents for every dollar of GST it collected. To address the imbalance, the federal government implemented a “floor” system, guaranteeing WA a minimum return of 70 cents per dollar, later rising to 75 cents. This effectively shielded WA from falling below that threshold, regardless of national redistributions.

The deal was justified at the time as a temporary fix to support WA’s mining-dependent economy. However, critics argued that it unfairly disadvantaged other states, particularly New South Wales and Victoria, which shoulder higher population growth and infrastructure needs.

• Minimum GST return: 70–75 cents per dollar collected
• Value of deal: estimated at $60 billion over a decade
• Review scheduled by 2026, now brought forward by Treasurer Chalmers

According to The Guardian, WA leaders are vowing to fight any attempt to overturn the agreement.

Why Is the Deal Being Reviewed Now?

The review has been triggered by fiscal imbalances emerging across the federation. States like Victoria and Queensland argue they are underfunded due to WA’s preferential treatment. At the same time, the COVID-19 pandemic, inflationary pressures, and rising healthcare expenditure have amplified budgetary stress across Australia.

The Productivity Commission has been tasked with examining whether the arrangement remains fair and sustainable. Among the key questions:

1. Does WA’s floor system distort the principle of horizontal fiscal equalisation?
2. How should national resource revenues be shared?
3. What are the long-term consequences for interstate equity?

The timing is particularly sensitive, as the next federal budget cycle looms in early 2026.

💡 What Could Change After the Review?

Several outcomes are possible:

• Status quo maintained: WA continues to receive a guaranteed floor, preserving its fiscal windfall.
• Modified floor: The guarantee is lowered or phased out gradually.
• Full removal: Return to pre-2018 system, redistributing more GST revenue to eastern states.

For businesses, especially those operating nationally, these changes could affect state tax policies, infrastructure investment, and service delivery. A reduction in WA’s advantage may also encourage diversification of revenue streams beyond mining royalties.

Impact on States and Territories

The GST review is more than a fiscal adjustment; it is a political flashpoint between WA and the rest of the country. Key state-level implications include:

• New South Wales: Likely to benefit from increased GST shares if WA’s floor is reduced.
• Victoria: Facing mounting debt, Victoria could also gain significant relief.
• Queensland: With population growth surging, a redistribution could ease budget pressures.
• Tasmania, SA, NT: Smaller states worry reforms could dilute their existing support.

WA Premier Roger Cook has already signaled a strong political fight to defend the deal, framing it as essential for the state’s economic stability.

Business and Economic Implications

For companies, especially in construction, infrastructure, and healthcare sectors, GST redistribution impacts where states can spend on projects. Businesses in NSW and Victoria may see increased opportunities if funding flows shift eastward. Conversely, WA-based firms may face reduced state investment, unless resource royalties fill the gap.

Tax professionals also warn that uncertainty in fiscal policy may affect investor confidence, particularly in industries reliant on state grants and subsidies.

Comparisons with Canada’s equalisation payments and Germany’s fiscal transfers show that balancing regional wealth is always politically charged. Australia’s case is no different, with businesses caught in the crossfire.

🚀 Political and Social Reactions

The GST review is shaping up as a defining political battle in late 2025. WA federal MPs have vowed to resist any changes, while eastern state leaders are pushing for reform. Media commentary highlights a potential federal election issue if tensions escalate further.

Socially, the perception of “fairness” remains central. Households in NSW and Victoria often feel they subsidise WA’s mining-driven prosperity, while WA residents argue they endured years of underfunding before the 2018 reforms.

Insights and Expert Commentary

Economists at the Grattan Institute argue that WA’s deal undermines the principle of horizontal fiscal equalisation. Meanwhile, WA’s Chamber of Commerce insists that stability is critical for long-term investment in mining and infrastructure.

Former Treasury Verifieds note that compromise is likely: reducing the floor slightly while introducing transitional funding for WA to avoid a sudden shock.

Summary and Key Takeaways

• WA’s $60 billion GST deal, struck in 2018, is under review in 2025 by the Productivity Commission.
• The review examines whether guaranteed minimum returns remain fair for other states.
• Possible outcomes: maintain, modify, or remove the GST floor.
• Impacts will extend to state budgets, infrastructure projects, and business environments.
• The debate is politically sensitive and could shape the 2026 federal election landscape.

For more details, follow Treasury updates and Productivity Commission reports on fiscal equalisation.

FAQ: GST Review and Its Impacts

Why was WA’s GST deal introduced in 2018?

It was designed to stabilise WA’s finances when its GST share had fallen dramatically, ensuring a minimum 70–75 cents per dollar collected.

Who benefits if the deal is removed?

Eastern states like NSW, Victoria, and Queensland stand to gain more GST revenue, easing their fiscal pressures.

How does this affect businesses?

Businesses may see changes in state-funded infrastructure, grants, and economic activity depending on redistribution outcomes.

Could WA lose investment if the floor is cut?

Yes, reduced GST shares could limit state spending, though mining royalties may offset some losses.

When will the review conclude?

The Productivity Commission is expected to deliver findings in early 2026, ahead of the next federal budget cycle.