The GST could be lifted from tampons across Australia within months if state treasurers agree on the proposal at a meeting in Melbourne on Wednesday.
The Coalition government under Malcolm Turnbull promised to lift the tax and add tampons to the list of GST-exempt items, which includes other health items like condoms as well as food.
The measure will cost the government around $30 million in lost annual tax revenue, and some states may ask for compensation at the meeting.
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Federal Treasurer Josh Frydenberg told ABC Radio he discussed the matter with the treasurers last night and said there “seemed” to be a “strong agreement”.
The tampon tax issue is likely to be much less contentious than the Morrison government’s broader redesign of GST redistribution, with the Victorian treasurer accusing the federal government of a political fix.
The Coalition’s plan, drafted when Mr Morrison was treasurer, will lock in a “floor” so that every state keeps at least 75 percent of the GST they collect.
Under the current system, money flows from the states making the most money to the poorer states so that government services are roughly equal around the country.
In the peak of the mining boom, Western Australia’s share dropped to just 35 percent as it propped up other states.
The government will make sure no state drops below the threshold by pumping in an additional $9 billion in federal money over a decade.
Eastern states have raised concerns they will be worse off under the deal.
"This has nothing to do with making the distribution of the GST fairer - it's about fixing the political problem Scott Morrison has in Western Australia," Victorian Treasurer Tim Pallas told AAP.
“The prime minister claimed that no states will be worse off - but they've provided no mechanism to ensure this is the case.”
Mr Morrison announced he would move to lock in the changes with legislation when parliament resumes in late October.
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