While there is considerable debate in Australia about the role of the States and their relationship with the Commonwealth, in the Australian community at large, and even among tax professionals, there is a widespread lack of understanding of the way in which the financial relations between the Commonwealth and the States are organised. As a result, there is a general inability to assess the criticisms being made of the 1999 Intergovernmental Agreement (IGA) under which the current earmarking of GST revenue to the States has been agreed with the Commonwealth. The objective of this publication is to assist in remedying this lack of understanding. It provides an explanation, in terms comprehensible to the intelligent layperson, of the workings of the system under the 1999 IGA, its financial implications, criticisms which have been made, and reform proposals. The publication attempts to take a balanced and neutral approach, rather than to recommend a particular package of reforms. Its intention is to inform, not to persuade.