Remote area tax concessions due for overhaul: Productivity Commission

The Productivity Commission has recently 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.

Commissioner Jonathan Coppel said that tax concessions and payments for residents and businesses in remote Australia are outdated, inequitable and poorly designed. Accordingly, the Commission has called for an overhaul of remote area tax concessions so they are better targeted and fairer.

Key points from the draft report include:

• The ZTO is an ineffective and blunt instrument. There is no evidence to suggest that the ZTO currently affects where people choose to live or work. Some areas are no longer isolated, but remain eligible. The ZTO should therefore be abolished.
• While the RAA has a legitimate role, it needs a refresh - with boundaries updated to contemporary measures of remoteness, payment rates reviewed and transparency enhanced.
• FBT remote area concessions should be redesigned to be consistent with the fundamental principle of equitable tax treatment while reducing the cost burden on taxpayers. Most significantly, 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 Commission said it will prepare the final report after further submissions have been received. The final report to Government is due by February 2020.

Comments are due by 11 October 2019.

For more information on remote area tax concessions please contact your usual Mazars advisor or alternatively our specialists on:

Published: 12 September 2019

Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.

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