Audit urges state income tax surcharge

While pre-budget rumours suggest high wage earners will face increased income taxes, the commission of audit suggests the commonwealth should be reducing them.

Among the audit's 86 recommendations released on Thursday is a proposal for the states to be given greater responsibility for raising revenue through an income tax surcharge.

This would involve the commonwealth reducing its personal income tax rate by an equivalent percentage point amount to support a new state surcharge.

This would ensure taxes do not rise overall.

The states should also be provided with the capacity to periodically vary the surcharge they impose, as a means of injecting further competition in the federation.

The commission also recommends GST revenue be shared on an equal per-capita basis among the states and territories.

This would include the commonwealth providing an additional grant so no state would be worse off, compared to the existing process.

Currently, the Grants Commission each year shares out GST revenue based on the performance of each jurisdiction.

The federal government has promised a tax review white paper within the next two years.