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The Federal Government has swiftly rejected recommendations from the Productivity Commission to axe the special tax concession for people living in remote parts of Australia.
- The Productivity Commission has recommended abolishing the Zone Tax Offset — a payment of approximately $300 a year to compensate for the higher cost of living in remote areas
- The commission argued it was “poorly targeted” and that it should be limited to only “very remote areas”
- The Federal Government immediately dismissed the recommendation
A report from the Productivity Commission released this week said the concessions were outdated, inequitable and poorly-designed.
But Assistant Treasurer Michael Sukkar quickly ruled out any changes and moved to calm fears.
“Were they to be implemented, the Productivity Commission’s recommendations would result in significant disruption to existing arrangements,” Minister Sukkar said in a statement.
“Given the challenges faced by regional Australia, including as a result of the impacts of the recent drought, bushfires and now Coronavirus, the Government will not be acting on the Productivity Commission’s recommendations.
“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 report looked at the effects of the zone tax offset, remote area allowance and remote area concessions for fringe benefits tax on people and businesses in remote areas.
It recommended abolishing the Zone Tax Offset (ZTO), a benefit of around $300 a year to help compensate for the higher cost of living in remote areas.
The move would save the Federal Government about $150 million a year.
The commission argued that the concession was “poorly targeted” with almost half the claimants living in large cities such as Townsville, Cairns, Darwin and Mackay.
If it were to be kept, it recommended limiting it to only “very remote areas”.
It also wanted the government to review the Regional Area Allowance, a supplementary payment for income support recipients.
But it was the proposed changes to Fringe Benefits Tax remote area concessions which generated the most angst in remote areas like the Pilbara in Western Australia.
The Commission said the government was forgoing up to $390 million in tax revenue a year because employer-provided housing was exempt from Fringe Benefits Tax, and this should be reduced to only a 50 per cent concession.
‘Living up here is not easy’
Queensland LNP Senator Susan McDonald said the concessions were hugely important to regional Australia and the report showed a lack of understanding of life in the bush.
“The Fringe Benefits Tax concessions are crucial for businesses in remote and rural Australia who provide accommodation to employees as part of their salary packages,” she said in a statement.
“Without these concessions, small outback businesses will not be able to attract workers.”
State Labor Member for the Pilbara Kevin Michel described the report as “a kick in the guts for regional residents”.
“I’m totally disappointed with the Productivity Commission report. People don’t seem to understand the cost of living up here in the Pilbara.
“It recognises the current zone allowances aren’t working properly and the inequalities that we face living in the region need to be fixed.
“But at the same time it recommends abolishing the tax rebate, rather than trying to fix these inequalities.
“The Commission should actually be asking for more tax concessions for people living in the Pilbara.
“Living up here is not easy.”
WA Regional Affairs Minister Alannah MacTiernan said the fringe benefits tax housing exemption was vital in attracting workers the region.
“The Pilbara is a major generator of wealth for the entire country and the fringe benefits tax exemption is indeed one of those things that is at least helping to create some balance, and going part way to addressing the problem of fly-in fly-out [workers],” she said.
Under the now-shelved proposals from the Productivity Commission, towns like Karratha, 1,500km north of Perth, would not be eligible for concessions available to “very remote” areas only. (ABC Pilbara: Susan Standen)
Tax breaks are needed: Shire of East Pilbara
Shire of East Pilbara chief executive officer, Jeremy Edwards, said the council was very disappointed in the recommendations.
“If the recommendations were implemented, it would have a huge financial impact on a shire like the Shire of East Pilbara,” he said
“The introduction of a 50 per cent rate for FBT on housing would cost the Shire $300,000 to $400,000 a year.
“For a shire like ours we have to provide employee housing to attract people to come to this region and to put FTB on top of that would be a huge cost,” he said.
“To attract people to the regions, you do need to incentivise.
“Having a blanket statement that people want to move to the regions for lifestyle choices is true, but for somewhere like the Shire of East Pilbara and Newman we don’t have a waterfront view, and it is really difficult.
“So the remote area tax concessions and some of the incentives for people to live in the area is really warranted and it’s needed to keep people in the regions.”
Mr Edwards said he is hopeful the proposal is gone for good.
“It scared us a little bit, we are still going to advocate through our local members, and also Senator Dean Smith, we’ve spoken to him in relation to it,” he said.
“So we are just going to keep the pressure on and make sure the government doesn’t implement something like this.
“The news was welcome, but we just hope it doesn’t come back and haunt us in the future.”