What is a methodology review?
In a methodology review the Commission reconsiders the principles and methods it uses to determine its advice to the Commonwealth Treasurer on distributing GST revenue between states and territories (states).
The Commission’s advice is underpinned by an assessment of states’ ‘relative fiscal capacities’. It uses analytical ‘assessments’, which estimate states’ revenue raising abilities and costs of providing public services. Different fiscal capacities indicate different requirements for GST revenue.
A methodology review provides an opportunity to ensure the Commission’s methods reflect what states do, incorporate the best available data sources, are policy neutral, and remain practical.
How does the Commission conduct a methodology review?
Methodology reviews have 4 key stages. The first step is to agree a work plan and discuss the principles underlying assessment methods. These guide how the Commission develops the assessment methods for determining states’ fiscal capacities. The Commission then collates these methods into a draft report prior to providing the final report to the Commonwealth Treasurer.
Throughout these stages, the Commission consults with the states, circulating the work plan, assessment method papers and draft report. This gives states the opportunity to highlight alternative methods and data that could improve the rigour of the Commission’s work.
The Final Report details the principles and methods that the Commission will use for the next few years. It simultaneously provides the Treasurer with updated recommendations for distributing GST revenue among the states in the following financial year.
How often does the Commission review its methodology?
The Commission begins a methodology review after receiving Terms of Reference from the Commonwealth Treasurer. Since the introduction of the GST in 2000, the Commission has completed 4 methodology reviews – 2004, 2010, 2015 and 2020. The review process takes 2 to 3 years.
On 9 February 2023, the Treasurer asked the Commission to commence a methodology review, reporting in 2025.