New South Wales is being ripped off by a “perverse” GST model that needs to be fixed, the state’s treasurer has complained after meeting state and federal counterparts on Thursday to discuss distribution for the next financial year.



Dominic Perrottet lashed out after being told around $451m in GST revenue will be stripped from the NSW budget next financial year. While the state’s GST share will fall by 0.7%, overall funding will rise by $520m in 2018-19.



“Yet again, we are seeing the hardworking taxpayers of NSW being ripped off by a perverse and unfair distribution model,” Perrottet said.

The treasurer reiterated his call for a per-capita system and to allow states to have a greater say in how GST revenue is carved up. He wants MPs, instead of “unelected, faceless bureaucrats” at the Commonwealth Grants Commission, to have more of an input.

“The fact that NSW is set to lose almost half a billion dollars only reinforces the view that a root-and-branch overhaul of the GST distribution process, and the Commonwealth Grants Commission itself, is desperately needed,” he said.

The federal treasurer, Scott Morrison, who met with his state and territory counterparts in Melbourne on Thursday, acknowledged there was more work to be done on the GST distribution formula. He said said he expects proposals for change to be handed to the government in May.

The total pool of $65.8bn from GST in 2018-19 is $3.4bn more than this financial year. Out of the states, the overall level of funding will only fall in Queensland (by $401m) and the Northern Territory (by $136m). It will rise in NSW (by $519m), Victoria (by $1.8bn), Western Australia (by $1bn), South Australia (by $467m), Tasmania (by $56m) and the Australian Capital Territory (by $54m).

Morrison said the figures – especially for the NT – showed there was more work to be done on the GST distribution formula.

“It’s not an easy issue but it does require a very patient and a good faith discussion about how we proceed,” Morrison said before the meeting.

Federal treasurer Scott Morrison after meeting state counterparts over GST in Melbourne. Photograph: Julian Smith/AAP

Any changes to the formula and transition plans for the states would be announced before the federal election, due by May 2019.

Morrison said the end to the mining investment boom had ripped $80bn out of the economy and created a shock for the GST distribution system, delivering “unintended consequences”, especially for WA.

The WA treasurer, Ben Wyatt, said 47c in every dollar, up from 34c last year, was a “better trajectory”. However, his government will still push for reform.

“Any increase above what we expect is good,” he told 6PR radio on Thursday.

The SA treasurer, Rob Lucas, said the new figures showed the existing GST distribution system, known as horizontal fiscal equalisation (HFE), was working.

“It shows that as the mining royalties decline in Western Australia, then their share of the GST increases significantly and our estimate is there will be another further significant increase for WA next year as a result of the existing HFE arrangements for the GST.”

The big jump in Victoria was mainly due to population movement, while Queensland’s share fell because of improvements to the economy.

The Labor leader, Bill Shorten, said the federal government had previously ignored WA’s “legitimate complaint” about a shortfall in its GST cut.

“Mr Turnbull wants the various states and regions to engage in the ‘hunger games’ while he ... gives $65bn to the top end of town,” Shorten said, in reference to the prime minister’s proposed business tax cuts.