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Remote Area Tax Concessions and Payments

Terms of reference

I, Josh Frydenberg, Treasurer, pursuant to Parts 2 and 4 of the Productivity Commission Act 1998, hereby request that the Productivity Commission undertake a study into the zone tax offset and related remote area tax concessions and payments.

Background

The Australian Government provides assistance to Australians who reside in specified geographic areas through the zone tax offset, the fringe benefits tax (FBT) remote area concessions and the Remote Area Allowance.

The eligible zones for the zone tax offset were originally established in 1945 and were based on exposure to uncongenial climatic conditions, isolation or a relatively high cost of living. The zones still largely reflect the original design in 1945, notwithstanding the demographic and infrastructure changes that have occurred in regional Australia in recent decades. The areas eligible for FBT remote area concessions are partly determined by reference to the zone tax offset boundaries, and the Remote Area Allowance is available to recipients of Australian Government income support payments who live in specified zone tax offset areas.

There have been concerns that the design of these mechanisms has not evolved to adequately reflect varying degrees of demographic, infrastructure and cost-of-living change occurring in Australia.

Scope of the report

The Productivity Commission is asked to determine the appropriate ongoing form and function of the zone tax offset, FBT remote area concessions, and Remote Area Allowance.

In conducting this review, the Productivity Commission is to:

  • examine the operation of the zone tax offset and FBT remote area concessions, including the levels of assistance provided, indexation and the boundaries of eligible areas and prescribed zones;
  • examine the economic and employment impacts of the zone tax offset, FBT remote area concessions, and Remote Area Allowance, including the effect of applying indexation, in regional Australia;
  • examine the operation of the Remote Area Allowance, which extends the benefits of the zone tax offset to income support recipients in remote zones;
  • consider whether the zone tax offset, FBT remote area concessions, and the Remote Area Allowance are delivering on their policy objectives and whether those objectives remain appropriate in a contemporary Australia;
  • consider if businesses in remote areas should be provided with similar support; and
  • consider if there are alternative mechanisms to better provide this support to Australians residing in specified geographic areas.

Process

The Productivity Commission is to undertake an appropriate public consultation process. This will include inviting public submissions in response to an issues paper and draft report. It will also involve consultation and meetings in regional communities.

The Productivity Commission is to commence this work in February 2019. A final report with recommendations should be provided to the Government within 12 months of commencement.

The Hon Josh Frydenberg MP
Treasurer

28 November 2018