The Productivity Commission has released its final report into three longstanding tax concessions and payments for remote areas.
The Australian Government asked the Commission to review the zone tax offset (ZTO), the remote area allowance (RAA) and fringe benefits tax (FBT) remote area concessions.
Australia has changed considerably since these concessions were introduced. Once small and isolated towns, Cairns, Darwin and Townsville have become large connected regional cities, and technology has reduced many of the difficulties of remote living.
After extensive consultation and analysis, the Commission recommends abolishing the ZTO and updating the remote area allowance and FBT remote area concessions.
The report found that the ZTO no longer serves a purpose in contemporary Australia, and is not needed. Removing what is now a small payment will not have a large or long term effect on the economies of those areas affected.
If the ZTO is retained the boundaries should be updated according to contemporary Australian Bureau of Statistics (ABS) classifications, and only those people living in very remote areas should be eligible.
The RAA should be better targeted. The report found that this allowance can help to alleviate the higher living costs and less ready access to services that many income support recipients in very remote communities face. The majority of RAA recipients in these areas face socioeconomic disadvantage and significant barriers to mobility.
FBT concessions for remote areas are overly generous, costly and inequitable and should be tightened. As broad-based concessions, they are poorly targeted to regional development and lack transparency.
There are more effective policies and programs that address regional and remote needs such as funding of public services including education and health, provision of infrastructure and natural disaster recovery funding. These policies and programs are funded by all levels of government.
Fact sheet 2: Remote Area Allowance
Fact sheet 3: Fringe Benefits Tax Remote Area Concessions
Fact sheet 4: Measures to Support Regional and Remote Australia
On the blog
Area-Specific Subsidies and Population Dynamics: Evidence from the Australian Zone Tax Offset, by Nathan Kettlewell and Oleg Yerokhin (3 June 2019)
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