Intense lobbying over recent months by the Australian Local Government Association (ALGA) and its member State and Territory LGAs has paid off with the announcement that Council rates, water and sewerage charges will be GST free under the Federal Government’s Tax Package.
However, ALGA believes that despite this exemption Councils and their communities still face a massive GST bill of hundreds of millions of dollars per year on Council services. Of even greater concern is the announcement that, with the States to receive all revenue raised from a GST, Local Government will become wholly reliant on the State Government for Financial Assistance Grants (FAGS).
President of ALGA, Councillor John Campbell said that these grants have been effectively frozen at an historically low level per capita and will decline further as a share of total taxes. He believes that the Federal Government is walking away from its responsibilities to local communities ‘by handballing the grants system to the States, without a sufficient long term guarantee that they will be maintained’.
Handing over all GST revenue to the States no doubt is aimed at averting a repeat of the infamous walk out by the States at the Premiers Conference. With the States already strapped for funding in health, education and so forth, throwing Local Government into the pot does not auger well.
The Federal Government’s estimation of how much will be raised from a GST also needs to be questioned. If a GST is introduced and it falls short of estimations, it will then be fairly easy to convince the States that an increase in the GST rate is necessary.
Reliance on State hand outs, with the Federal Government washing its hands of Council funding, has major repercussions for Local Government as a player in the national arena. A return to ‘Creatures of the State’, through both legislation and funding control, would undermine the enormous work by Local Government to ensure that the local communities it represents are considered in national policy making forums.
It is for this reason that ALGA is lobbying for Local Government, like the States, to have a guaranteed share of revenue raised by a GST.
To date the Federal Government has made no commitment to consult with Local Government over proposals outlined in its tax package. As is happening across the nation, Councils and their communities need to carefully evaluate all aspects of how this package will impact on them and their locality.
