Tax concessions and allowances for Australia’s most regional, remote and isolated residents are here to stay despite a review recommending otherwise.
Michael Sukkar MP has thanked the Productivity Commission for conducting the review, which his own government had requested “as part of the Coalition government’s commitment to regional development”.
The final report made a number of findings and recommendations relating to the abolition of the zone tax offset, and widespread overhaul to the fringe benefits tax remote area concessions’ remote area allowance.
“Were they to be implemented, the Productivity Commission’s recommendations would result in significant disruption to existing arrangements,” Mr Sukkar stated.
In acknowledging a need for change, the Productivity Commission had reported that “Australia has changed considerably since these concessions were [first] introduced” in its final report.
It argued that while Cairns, Darwin and Townsville were once small and isolated towns, they have become large, connected regional cities.
The Productivity Commission also emphasised the impact of technology, saying it had reduced many of the difficulties of remote living.
It had recommended the abolishment of the zone tax offset and the overhaul of remote area allowances and fringe benefit tax remote area concessions.
The final report was substantively similar to recommendations in the draft report, and the assistant treasurer had acknowledged “the volume of submissions” that were provided to the commission in response to that draft.
An overwhelming majority were not supportive of the proposed changes.
In advising it would not heed the report’s recommendations, the government outlined the challenges currently being faced by regional Australia, including impacts of the recent drought, bushfires and the coronavirus.
Mr Sukkar considered: “The most important thing we can do at this time is continue to provide certainty and confidence to those living in regional areas that the government remains fully committed to supporting the growth of our regions and their continued success into the future.”
The zone tax offset (ZTO), an income tax offset available to residents of specified parts of Australia, was initially designed to compensate residents for harsh climatic conditions, isolation and a higher cost of living in the zones.
The report found that “the ZTO no longer serves a purpose in contemporary Australia, and is not needed”.
It argued that “removing what is now a small payment will not have a large or long-term effect on the economies of those areas affected”.
The remote area allowance (RAA) was first introduced as a companion payment to the zone tax offset and is a supplementary payment for income support recipients in eligible areas.
Acknowledged as having a “legitimate” role by the Productivity Commission, the RAA is designed “to compensate for some of the higher costs of living and reduced access to services affecting income support recipients in remote area”.
Most recipients of this allowance reside in very remote and remote areas, with a majority in the Northern Territory.
Half are located within areas of the highest socioeconomic disadvantage, while two-thirds of recipients are Indigenous Australians. The Productivity Commission also notes the large majority are in receipt of either the Age Pension, the disability support pension, Newstart allowance or parenting payment.
Acknowledging the benefits of this system, the Productivity Commission did still consider that the RAA “should be better targeted”.
The fringe benefit tax (FBT) remote area concessions. Under Australia’s FBT scheme, employers may claim tax concessions for some goods, services or financial assistance provided to employees working in designated remote areas.
It considered that FBT concessions for remote areas are “overly generous, costly and inequitable and should be tightened” before considering such benefits to “go beyond what is needed to make the tax equitable”.
“As broad-based concessions, they are poorly targeted to regional development and lack transparency,” the report said.