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Remote area tax concessions and payments should be overhauled

Remote area tax concessions and payments should be overhauled

The Productivity Commission has called for significant reforms to the tax concessions and payments for residents and businesses in remote Australia as they are “outdated, inequitable and poorly designed”.

Its draft report assessed the zone tax offset (ZTO), the remote area allowance (RAA) and the fringe benefits tax (FBT) remote area concessions.

The Commission recommended the abolition of the ZTO as it is an “ineffective and blunt instrument”. There is no general role for the government to compensate taxpayers for the disadvantages of life in particular areas. Were it to be retained, the ZTO would need to be overhauled.

The RAA is a small supplementary payment directed to people on income support in remote areas. It has a legitimate role but needs a “refresh”, with boundaries updated to contemporary measures of remoteness, payment rates reviewed and transparency enhanced.

Finally, FBT remote area concessions are “overly generous and complex”. They should be redesigned to adhere to the fundamental principle of equitable tax treatment while reducing the cost burden on taxpayers. Most importantly, concessions on employer-provided housing should change. The current exemption should be reverted to a 50% concession (as it was prior to 2000), and provisions allowing employers to claim housing exemptions solely because it is “customary” to do so should be removed.

The closing date for comments on the draft report is 11 October 2019.

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