Since its introduction in 2000, the GST revenue has been distributed to the States and Territories based on recommendations of the Commonwealth Grants Commission. In 2011-12, $50 billion in GST revenue is expected to be provided to the states.
The GST is distributed to States based on the principle of horizontal fiscal equalisation. This approach is designed to ensure that States and Territories have the fiscal capacity to provide to their residents services of the same standard in areas such as education, health and public transport. The actual level of services delivered is a matter of policy for each State and Territory, the Commission's focus is equalising the fiscal capacity.
The Review will consider whether the distribution of the GST and the current form of horizontal fiscal equalisation will ensure that Australia is best placed to respond to long-term trends and structural change in the economy while maintaining confidence in the financial relationships within the Australian Federation.
The review will provide an interim report to the Treasurer by February 2012 and a final report by October 2012.