Report
Description

Tax concessions for remote areas date back to the end of World War II when an income tax concession was introduced in recognition of the high living costs, isolation and uncongenial climate in much of remote Australia.

Australia has evolved considerably since then. Some places that were undeniably remote in 1945 have become urbanised, with good connections to the rest of the country and the world. Over that time, technological and economic developments have cushioned many of the difficulties of living in remote Australia.

This study is a timely review of three longstanding tax concessions and payments targeted to residents and businesses in remote and regional areas: the zone tax offset, the remote area allowance, and the fringe benefits tax remote area concessions. The study examines the operation and effectiveness of the measures, and their role and relevance in contemporary Australia, as part of a broader tax and transfer system.

Key points:

  • Remote area tax concessions and payments are outdated, inequitable and poorly designed. They should be rationalised and reconfigured to reflect contemporary Australia.
  • Remote Australia has changed considerably since the introduction of the first of these concessions in 1945. Many areas once considered isolated are no longer so, and improvements in technology have reduced the difficulties of life in remote Australia, although to a lesser extent in very remote places.
  • About half a million Australians live in remote areas far from cities and regional centres. The tyranny of distance makes living and doing business challenging, with many things taken for granted by most Australians unavailable or difficult to get. Yet for those in remote Australia there is frequently a strong personal or cultural connection to a place and community as well as to the way of life it offers. Others are attracted by job opportunities.
  • The zone tax offset (ZTO), remote area allowance (RAA), and fringe benefits tax (FBT) remote area concessions are designed to redress some of the inherent challenges of living in, or to support, parts of regional and remote Australia.
  • In looking at alternative mechanisms to support regions, governments should be cautious of top-down approaches. While there are few one-size-fits-all solutions, harnessing existing capabilities and locational advantages should be at the core of any such strategy.
Publication Details
Publication Year:
2020