The ACT will get a 2.1 per cent share of GST revenue under Grants Commission allocations for 2023-24

Under recommendations released by the Commonwealth Grants Commission (CGC) on Tuesday, the ACT will receive an extra $223 million of GST revenue next financial year, taking its share of the $86.24 billion national GST pool to $1.83 billion.

Mr Barr warned the territory could be short-changed by $100 million a year from 2027-28 onwards if the federal government did not step in to extend transitional arrangements due to expire in mid-2027.

The chief minister cautioned that a more immediate threat to ACT's came from the hit to consumer spending from successive rate hikes.

"The numbers in the CGC report are based on current estimates of GST revenue for 2023-24. There is a risk that the GST pool will reduce as a result of the impacts of higher interest rates on consumer spending," Mr Barr said. "We will not know what federal Treasury are expecting until the federal budget is released in May."

The chief minister said the increase in the ACT's GST share reflected factors which had been taken into account in the territory's budget.

"The ACT is the fastest growing jurisdiction in the country, and our population increase is placing pressure on our infrastructure pipeline and service delivery. This hasn't been helped by close to a decade of underfunding from the previous Liberal government towards ACT infrastructure projects," he said.

"Thankfully, we now have a Commonwealth government that is working to ensure the ACT gets our fair share of financial support for infrastructure projects, and the additional GST revenue will support efforts to respond to the growth in our local population."

The ACT's mid-year budget review, released in February, forecast $1.7 billion in GST revenue. The August 2022 ACT budget revealed the government intended to bank most of its GST windfall, a result of upgraded population estimates following the 2021 census, to pay down debt.

Taken together with $96 million in top-up payments to be made under the terms of the 2018 GST sharing deal struck by the Morrison government, the ACT will receive a total of $1.928 billion in 2023-24 - a 2.1 per cent share.

Overall, the commission expects $86.24 billion will be distributed among the states and territories next financial year, a $3.1 billion increase, plus $4.88 billion of 'no worse off' payments made under the terms of the 2018 Morrison deal.

Under that arrangement, no state or territory will receive less than 70 cents in the dollar of GST revenue raised in the state, with the Commonwealth committed to covering any top-up payments required.

The cost of the arrangement has ballooned from an estimated $4.6 billion over eight years to more than $24 billion.

The Canberra Times exclusively revealed on Monday that Treasurer Jim Chalmers had written to the Grants Commission on February 9 asking it to review the deal.

But during a visit to Perth on Tuesday, Treasurer Jim Chalmers reiterated the federal government was committed to the arrangement.

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Dr Chalmers said without it, Western Australia would have received just 10 cents in the dollar but would instead get 70 cents in the dollar, resulting in an extra $5.6 billion.

"This is the deal that we are committed to, this is a deal that we are proud of," the treasurer said.

"This is a deal that ensures we recognise that the Western Australian economy often keeps the wheels of the national economy turning."

The deal was struck in 2018 after Western Australia complained that its share of GST revenue had dropped to 30 cents in the dollar because of soaring iron ore royalties.

The Morrison government set a 70 cents in the dollar floor (rising to 75 cents in the dollar from 2024-25) for WA's GST share and committed the Commonwealth to providing 'no worse off' payments to the other states and territories during a transition period due to expire in 2026-27.

Victorian Treasurer Tim Pallas slammed the deal as "a ridiculous distortion" of the GST sharing system.

"The way that the GST is currently being applied is an affront to decency," Mr Pallas said.

"It, quite frankly, is a ridiculous distortion put in place by the previous Morrison government. But put that to one side, the problem exists now and it's a problem for the Albanese government to address."

Victorian Premier Danial Andrews said Victoria would fight any move that worsened the outcome for his state.

"You want to do a sweetheart deal for WA, that's fine if that's your choice," he said. "But you have been compensating us for that and you need to keep compensating us for that. It's just fairness. It's just the right thing to do."

Dr Chalmers said the federal government had yet to make any decisions about whether to extend no-worse-off payments beyond 2026-27.

"We'll consider that at the appropriate time," he said. "We will engage with the state treasurers in the usual ways at the usual time when it comes to that review of the no-worse-off guarantee."

The biggest share of the GST pie, $24.8 billion, will go to New South Wales. Victoria will receive almost $18.8 billion, Queensland $18.2 billion, South Australia $8.42 billion, Western Australia $6.48 billion, Tasmania $3.4 billion and the Northern Territory $4.2 billion.

On a per capita basis, the NT will receive by far the biggest share at $1076, while the ACT will get $503 - well above the national average of $146 per person.

The commission has made its recommendations based on assessments of the costs each state and territory faces because of population size and growth, wage pressures, demographics such as age and how dispersed people are.

The commission offsets these costs against the ability of the jurisdiction to raise revenue from sources such as mining royalties and payroll and property taxes.

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