THE Federal Government is offering WA a $4.7 billion GST breakthrough it says will end the State’s battle with the Commonwealth Grants Commission and deliver financial certainty to taxpayers.

In the biggest change to the GST allocation system since it was put in place by John Howard and Peter Costello in 2000, Treasurer Scott Morrison will today unveil an overhaul that leaves no State or Territory worse off while putting more money into the hands of the WA Government.

But the full journey to GST fairness will take eight years.

Rejecting key proposals from the Productivity Commission review of the GST system, the Federal Government wants a three-step process to smooth the year-to-year gyrations that have hurt WA since 2010.

Under Mr Morrison’s proposal, the Federal Government will set a 70¢ in the dollar floor for WA’s annual GST allocation.

This will deliver WA a $1.4 billion windfall over the next two years.

From 2021-22, the Gov-ernment will inject $600 million annually from general revenue into the GST pool as it begins a gradual change to the way the GST is allocated by the grants commission. Instead of allocating money to States to bring them in line with the nation’s fiscally strongest State, which for the past decade has been WA, a new measure based on either NSW or Victoria will be established.

The Government will lift its contribution to $850 million in 2024-25 when a 75¢ floor for all States and Territories will be introduced. Over the period, $5.2 billion, indexed in line with growth in GST collections, will flow from Federal taxpayers into the grants commission’s pool.

Unlike the Government’s previous top-ups to WA, this money will not be tied to specific projects or spending limitations. By the time the system is fully implemented in 2026-27, WA will have collected an extra $4.7 billion in GST over what had been expected.

Mr Morrison said the changes would protect all taxpayers, update the grants commission process and deliver certainty to States and Territories. “This problem has been kicked down the road for too long and it is time we now got on and fixed it,” he said. “A fair and sustainable transition to a new equalisation standard will be ensured, through an additional, direct, and permanent Commonwealth boost to the pool of funds to be distributed among the States.”

The move puts pressure on the Labor Party to reconsider its position on GST reform. It has offered a $2.1 billion Fair Share for WA package, taking the State’s GST share to 70¢, but ruled out overhauling the GST allocation system.

The Federal Government’s proposal will go to a meeting of State and Territory treasurers later this year. The proposed changes do not require legislation although the Government wants all States to sign off on the package.