Turnbull rejects WA treasurer’s income tax trial idea

Prime Minister Malcolm Turnbull has rejected the West Australian treasurer’s proposal to let the state trial his income tax plan after it was shot down by every other jurisdiction.

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At the recent Council of Australian Governments meeting, all state and territory leaders excluding WA Premier Colin Barnett said they did not accept the idea of letting them levy a percentage of income tax, allowing the Commonwealth to axe grants.

Mike Nahan then urged Mr Turnbull to allow WA to go it alone as a trial, but the prime minister told a business function in Perth on Wednesday that was not feasible.

“It’s something that can’t be done,” Mr Turnbull said.

“With respect to the state treasurer, Commonwealth taxes have to be uniform across the country.

“But nonetheless, states have got to consider their own tax bases. There is a lot of opportunity for tax reform at the state level.”

Mr Turnbull also noted WA’s ongoing push for changes to the GST distribution formula, saying it was “not reasonable” the state was being handed a historically low proportion just when its revenues were being squeezed.

That was because the carve-up was calculated based on revenue from three years ago, when the WA economy was stronger.

He would not say if he supported a “floor” stipulating a minimum amount a state or territory could be paid, but accepted there was a general belief the system needed to be reviewed.

“I’m very alert to these issues but they will need to be put on the table at COAG and discussed,” the prime minister said.

“My West Australian colleagues have been quite assiduous in making sure I know more about the arcane complexities and sometimes perverse outcomes of the Commonwealth grants system than perhaps one ever wanted to know.”

Wednesday was Mr Turnbull’s third straight day in WA, fresh from pledging a one-off $490 million payment to make up for the state’s low GST share.

Last year, the Abbott government stumped up $499 million for the same reason.