Commonwealth Grants Commission

The Commonwealth Grants Commission (CGC) is an independent statutory authority established on the
17 July 1933 under the Commonwealth Grants Commission Act 1973- external site to recommend to Government how the revenues raised from the GST should be distributed to the states. 

In the Intergovernmental Agreement on Federal Financial Relations, which came into effect on 1 January 2009, the Commonwealth commits to the provision of ongoing financial support for the states’ service delivery efforts. The financial support includes the provision of GST payments to the states, equivalent to the revenue received from the GST, to be used by the states for any purpose. The agreement states that GST payments will be distributed among the states in accordance with the principle of horizontal fiscal equalisation.

The Federal Financial Relations Act 2009 (the FFR Act) appropriates funds to provide financial assistance to the states and implements reforms to modernise federal financial relations in accordance with the financial framework in the Intergovernmental Agreement on Federal Financial Relations. It specifies the formula for determining a state’s GST entitlement.

In 2018, reforms to the GST distribution arrangements were implemented by the Treasury Laws Amendment (Making Sure Every State and Territory Gets Their Fair Share of GST) Act 2018.

Under these reforms, the CGC Act was amended to:

• establish a new equalisation benchmark linked to the fiscally stronger of NSW or Victoria
• provide for transitional arrangements until 2026-27, comprising a staged implementation of the new equalisation benchmark

The Federal Financial Relations Act 2009 was amended to:

• specify a GST relativity floor;
• include Commonwealth funded top-ups to the GST pool; and
• provide for transitional assistance to the states until 2026-27 to ensure they are not worse-off under the new legislative arrangements.