A change to the GST distribution and a proposal to enable states to levy income tax appear to be doomed after a meeting of the Council of Australian Governments.
The state and territory leaders met with Prime Minister Tony Abbott in Canberra on Friday to discuss two separate reviews due to be completed by the end of 2015, on the federation and taxation.
The premiers also agreed on a deal to receive incentive payments if they sell off assets such as ports and electricity utilities and put the money into new roads and other infrastructure.
The meeting came a day after the national commission of audit called for the federal government to consider giving the states greater responsibility for raising revenue through an income tax surcharge.
The audit report also called for GST revenue to be shared on an equal per-capita basis, with the commonwealth providing an additional grant so no state is worse off.
Currently, the grants commission each year shares out GST revenue based on the performance of each state and territory.
Making his first comments on the income tax plan, Prime Minister Tony Abbott said he did not think “anyone should assume that is a likely outcome”.
“No one wants to see double taxation,” he said.
The premiers, who held a joint press conference with the prime minister, were at odds over moving to a population-based GST distribution.
Tasmanian Premier Will Hodgman, attending his first COAG, said he would be standing up for his state in arguing for the status quo.
South Australian Premier Jay Weatherill backed up his Liberal colleague saying every Australian was entitled to the same level of service wherever they lived.
West Australian Premier Colin Barnett said it was not “beyond the wit” of the state and federal leaders to reform the GST.
“We should do it in a way where change occurs over time,” he said.
Summing up the debate, Mr Abbott said: “No one should assume radical change is coming.”
However he backed the principle that “the people who spend the money, raise the money”.
All governments signed an agreement on incentive payments for privatising assets and reinvesting the money in new projects.
Mr Abbott said the broad details of the plan will be revealed in the federal budget on May 13 and individual agreements would be negotiated with the states.
The state leaders welcomed the agreement, but Queensland Premier Campbell Newman echoed the thoughts of his colleagues when he said his government would need another mandate before assets could be sold.