GST raised to 12% with fresh food, health, and education exempt — distribution switched to spend-based, automatic, transparent. 25% of the Resource Extraction Levy direct to the state where extraction occurs. SBC corridor revenue share. Payroll tax floor lifted to $2M nationally. No more cost-shifting.
States deliver hospitals, schools, police, and roads on 45% of government revenue. Starved of funds, they lean on payroll tax, stamp duty, and land tax — bad taxes that punish growth — while the Commonwealth holds the income tax and GST levers. Vertical fiscal imbalance is the single biggest structural problem in Australian government funding, and no major party has been willing to fix it for thirty years.
GST at 10% is the lowest rate in the developed world. Horizontal Fiscal Equalisation distribution penalised WA at less than 30 cents per dollar for a decade. The formula rewards need, punishes productivity, and is renegotiated annually around political pressure rather than principles. Both the rate and the distribution are broken.
Canberra announces programmes and states fund the gaps. Hospital shortfalls. Mental health pilots dumped on states permanently. Every cost-shift shrinks the room for real services. The Commonwealth gets the headline; the state pays the bill; the citizen blames the wrong level of government for the failure.
MMP raises GST from 10% to 12% — a 20% increase in the pool — with fresh food, medical, and education exempt. Distribution switches to spend-based: each state receives GST proportional to what its residents spend. Automatic. Transparent. No Grants Commission renegotiation. States that grow their economies get more. States that retain population get more. The annual political theatre ends.
The Resource Extraction Levy distributes 25% of gross revenue to the state where extraction occurs. At $40–80B/yr total REL: $10–20B/yr split across extracting states. WA iron ore and gas alone generate $8–12B/yr in REL, of which $2–3B flows directly to the WA government. Permanent revenue from the ground that was always theirs.
Every state through which an SBC corridor passes receives a corridor revenue share — easement, local employment, and a percentage of power transmission revenue. $500M to $2B per state annually at Phase 1 scale, growing to $2–8B at full build. Permanent — not a one-off grant. The corridor keeps paying as long as it runs.
States use payroll tax to fill revenue holes Canberra creates. Fix the hole and the threshold can rise. MMP sets a national floor of $2M via National Cabinet — no state can go lower, pathway to $3M. The cliff that stops hiring at $700K shifts to $2M. As GST, REL, and corridor revenue grow state budgets, the pressure to hold payroll tax low disappears permanently.
Every Commonwealth programme delivered through states comes with full-cost funding for the life of the programme. No matched-funding traps. No sunset cliffs. No pilot-to-permanent gaps. Hospital funding at the agreed Commonwealth percentage — states no longer fund the gap. Cost-shifting prohibited under MMP fiscal protocols, enforced through the grants process.
20% of the SBC Revenue Lock goes to a National Infrastructure Fund — allocated by an independent authority, not ministers. States apply on merit. Projects assessed on economic return, community need, and national interest. No pork-barrelling. Every decision published. Regional communities access it on equal terms with capital cities.
Local governments receive a fixed share of the SBC corridor revenue passing through their jurisdictions — permanent, predictable funding that ends the rate-rise spiral. In return, councils accept federal standards on transparency, conduct, and accountability. The deal: real money for real reform.
GST + REL + SBC corridor + no cost-shifting + payroll tax floor = states are properly funded for the first time in modern Australian history. In return, states accept federal standards on hospital wait times, school outcomes, and policing accountability. Real money for real performance. The current adversarial federation becomes a working one.
| Current — Broken Federation | MMP — Working Federation |
|---|---|
| GST at 10% — lowest in developed world. HFE renegotiated annually. | GST 12% with essentials exempt. Spend-based distribution. Automatic. |
| Resource royalties to states ad-hoc. Federal-state argument. | REL 25% direct to extracting state. Automatic. Constitutionally locked. |
| Cost-shifting from Canberra to states routine. | Full-cost Commonwealth funding for the life of every programme. Cost-shifting prohibited. |
| Payroll tax thresholds vary state by state. Cliff at $700K stops hiring. | National floor $2M via National Cabinet. Pathway to $3M. |
| No state share of major federal infrastructure. | SBC corridor revenue: $500M–$2B per state Phase 1, growing to $2–8B. |
| Pork-barrel infrastructure decisions. | 20% of SBC Revenue Lock → independent Infrastructure Fund. Merit-based. |
| Local government underfunded, rate-rise spiral. | Fixed corridor revenue share to councils + transparency standards in return. |
No memos pinned to this policy yet. When an MMP memo on this topic is published, it will appear here with a short summary. The full memo index is at moralmajority.com.au/memos.html.