On 4.9.19, the Productivity Commission today released a draft report on Remote Area Tax Concessions and Payments. The Government tasked the Commission to assess the zone tax offset (ZTO), the remote area allowance (RAA) and the FBT remote area concessions.

See below for further detail.

FJM 7.9.19

[Tax Month – September 2019]

 


 

‘Tax concessions and payments for residents and businesses in remote Australia are outdated, inequitable and poorly designed’, Commissioner Jonathan Coppel said on release of the Productivity Commission’s draft report on Remote Area Tax Concessions and Payments.

  • The Commission has called for an overhaul of remote area tax concessions and payments so they are better targeted and fairer.
  • The Government tasked the Commission to assess:
    • the zone tax offset (ZTO),
    • the remote area allowance (RAA) and
    • the fringe benefits tax (FBT) remote area concessions.
  • The Commission held extensive consultations with communities and businesses in remote Australia. It will continue to engage with stakeholders in developing its final report.

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(1)  The Commission’s assessment is that the ZTO should be abolished.

  • Remote Australia has changed considerably since the ZTO was introduced in 1945. Some eligible areas, like Cairns, Townsville and Darwin, are no longer remote.
  • And the ZTO has little influence on where people live or work.
  • ‘More fundamentally, there is no clear role for Government to compensate taxpayers for the disadvantages of life in remote areas. Many ZTO recipients are already compensated by higher remuneration and many enjoy the nature and pace of remote living’, Mr Coppel said.

(2)  ‘The RAA has a legitimate role but needs a refresh’, Mr Coppel continued.

  • The RAA is a small top-up for welfare recipients in remote areas, to help cover high living costs.
  • The majority of recipients are from areas with socio-economic disadvantage and most do not benefit from the higher wages that apply to many ZTO recipients.
  • ‘The RAA boundaries date back to the early 1980s and need updating, and the payment rates are overdue for a review’, Mr Coppel said.

(3)  Remote area FBT concessions were introduced to prevent remuneration ‘in kind’, such as housing, from being used to lower income tax.

  • But sometimes, remote area tax concessions are needed to make the tax equitable, particularly where there are operational reasons to provide these ‘benefits’.

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‘The current concessions are overly generous and complex’, when we pulled together the evidence, Commissioner Paul Lindwall said.

  • ‘Being broad-based concessions, they are also a blunt tool for regional development and not a cost-effective way to get employees or employers to move to, or invest in, regional areas’, he added.
  • These concessions should be better targeted.
  • ‘Most significantly, the current exemption on employer-provided housing should revert to a 50 per cent concession (as it was before 2000)’, Mr Lindwall said.
  • The Commission is not recommending changes to remote area FBT concessions related to fly-in fly-out.

The Commission is keen to get your feedback. You can find the draft report at www.pc.gov.au/remote-tax, and provide feedback by using the submission or brief comments links.

You are invited to examine the draft report and to make written submissions by Friday 11 October 2019.

[Productivity Commission website: Media ReleaseReport; LTN 170, 4/9/19; Tax Month – September 2019]

 

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