Remote Area Zone Tax Rebate – Now’s our chance to fix it

It has been surprising that the Remote Area Tax Rebate (most recently referred to as the ‘Zone Tax Offset’) doesn’t appear to have been mentioned in the independent’s discussion list – in particular Bob Katter’s list. 

The single best achievement these rural independents could make would be raising the Remote Area Zone Tax Rebate/Zone Tax Offset up from the rates which don’t appear to have changed much since the original introduction in 1945. 

Encouraging population decentralisation in this most economically efficient manner (a tax rebate is infinitely better than upfront subsidies) would have a multitude of benefits.  Eg helping the environment by limiting the over-use pressure on open spaces (rivers, beaches, parks, bushland etc) in and around our largest cities.  And pegging back the brick & tile sprawl into bushland would help preserve native plants and animals in what are often our most biodiverse regions, as well as protecting increasingly scarce (and increasingly valuable) food producing land (thus reducing pollution caused by excessive haulage and maintaining use of our most efficient food growing land – i.e. reducing the need for inputs such as fertiliser and irrigation). 

A Remote Area Zone Tax Rebate at a level that genuinely reflects the much higher cost of living, working and raising a family in the bush would assist small remote regional business owners directly and indirectly via their employees.  And it would restore at least some social equality and dignity to the most remote regional residents upon whose food growing and export-income efforts the rest of us are entirely dependent.  Prosperous regional economies help ensure prosperous cities.  Apart from a tiny number of locally residing miners, the majority of rural residents have much lower incomes than coastal residents, poorer health statistics and much higher living expenses.  A healthy tax rebate for genuinely permanent remote residency would also encourage the cessation of the extremely socially destructive fly-in fly-out mining practices.  

A simple example of the higher cost of living in remote areas is petrol.  In the remotest parts of Australia – where there is of course no government (i.e. taxpayer) subsidised public transport – unleaded petrol is now around $2.00 per litre.   This is about $1.82 plus 18c GST per litre.  Compare this to today’s list of cheap petrol prices in Melbourne, which averages $1.13 per litre.  This is $1.03 plus 10% GST of just 10c per litre.  Given that the resident paying an extra 8c GST per litre is likely to have to drive a round trip of 700km or more to get to their closest bank, post office, food retailer or doctor, and the resident with easy access to cheaper fuel is likely to only have to do a max. of 10km or less to get to and from these essential services (and with the option of cheap, subsidised public transport as well), it’s very obvious that the person living in a remote area is coughing up a massive amount more in Goods and Services Tax than someone living in a city, for comparable purchases.  Higher prices for goods in remote areas are inevitable due to freight costs, the lack of economies of scale/bulk buying purchase discounts for smaller turnover retailers, and the higher living costs also borne by the remote area business owners.

I’ve been asked ‘why should people in cities subsidise people living in the bush?’  When I have recovered from the shock of such a display of ignorance, I’ve explained that what they perceive as ‘subsidisation’ is in reality ‘equitable taxation’ and set about providing a rough & ready but nonetheless effective summary of the history of ‘civilisation’:

– in cave man times, it was every man (and woman) for themselves.  Their daily lives were spent gathering and catching enough food to eat for that day.  In most parts of Australia, this is how aboriginal people lived prior to the arrival of Europeans.  In better seasons and in better areas there was some lie-around-and-relax time, but much of the time – there was minimal time for relaxation.  Bush tucker gathering is constant yakka, in most areas natural food supplies are insufficient to allow for all-year-round permanent settlement, and it’s perilous.  People living a subsistence life are constantly at risk of starvation due to a poor season (too much or too little rain or temperatures that are too hot or cold), a locust plague or a bushfire.

– In countries where plant species were well suited to being grown as monocultures and soil and climate made it do-able, some people started farming and producing more food than they could eat themselves.  They started trading their excess with people who weren’t so keen on food producing, who started up businesses producing something else instead (eg clothing or furniture) or providing a services (eg mud hut building).  The two major aspects of modern society were born – trading & towns.

– As food production, transport and storage systems (eg refrigeration) advanced and became more sophisticated, more and more people were able to spend their lives working in occupations other than food production.  Tiny villages turned into towns and then into cities and some of these turned into huge metropolises, with housing, goods and services arranged in a certain manner according to frequency of use/public demand etc.  (This is basic urban planning principles recalled from year 11 geography, thanks Mrs de Vries.)

– But one thing hasn’t changed.  Everyone needs food.  No farmers = no cities.  Most urban residents don’t have nearly enough land to produce enough food for themselves to eat all year round – even if they did have the necessary knowledge and enthusiasm to do so.

– We’re on an island.  Yes it’s a big one, but it’s still an island.  Ask a Briton who lived through the food shortages of WWII what they think of relinquishing all local food production in favour of 100% imports.  Ask the average Aussie if they’re prefer to eat food grown & handled under our own food production standards, or that of a third world country where survival is at a premium and food safety standards are secondary. 

– Australia no longer rides on the sheep’s back but agriculture does still account for a large amount of export income.  This purchases everything from TVs to dishwashers, affordable clothes and cars.  All produced in other countries.  No export income = no imports.

– It’s more efficient to have the Australia population spread around in regions rather than concentrated in just a handful of massive cities.  It seems to me Australian cities reach peak economies of scale with regard to provision of services (eg specialist medical services, base hospitals and universities, which need a large population to be justifiable and sustainable) and social/living standard levels somewhere around 150,000 people (depending on the catchment area, etc).   Larger than that, and the problems associated with big cities start to proliferate (pollution, urban sprawl, traffic problems, crime, vandalism and other anti-social behaviour associated with perceived anonymity etc).   For smaller towns, around 10-15,000 is a good number – big enough to support at least a couple of supermarkets, a range of banks, car dealers and mechanics, doctors, a hospital and other government services.

– Decentralisation also helps maintain a much more diverse and interesting national identity, and reducing the number of large areas with no permanent residents gives us a more flexible security blanket should climatic changes (short or long term) make residing in any particular area more difficult.  And a well populated north has quarantine/biosecurity benefits; helping to keep Australia free of smugglers (from native animals and birds, to drugs and illegal immigrants) – thus helping to keep out serious foreign pests and diseases that would decimate our native animals and plants; domestic animals and our economy.

 – And there is of course the issue of social justice.  Apart from a relatively small amount of tax refunded to tax payers in remote areas, they pay income tax at the same rate as anyone else.  And because goods and services are much more costly, they actually pay a lot more GST to obtain the same amount of goods and services, compared to residents in capital cities (where it’s also very easy to save large amounts of money by consistently shopping for convenient bargains).  Yet remote area residents do not have ready access to all the government provided services paid for by their taxes and so taken for granted in cities – from public transport to libraries, galleries, festivals, local schools and hospitals, good quality all-weather roads, local ABC radio and television news services, etc.  In fact there’s a large slab of inland Australia that can’t even receive any ABC radio services, except on their TV or computer (of no use when you’re not in your office or loungeroom, and worse than useless when you’re spending a few hours in the car on the way to the nearest town).

These days the most socially disadvantaged aren’t living in cities, they’re in the bush, producing our food and export income.  Raising the Remote Area Zone Tax Rebate to a level equivalent with the rate paid when it was first introduced in 1945, would also send a message to remote Australians to let them know they were respected and valued. 

Of course fly-in fly-out miners should be ineligible for any remote area tax rebate/zone tax offset.  Because fly-in fly-out shiftworkers are not genuinely permanent rural residents only visitors; they purchase little or no goods and services locally, have very good travel and living conditions provided for by their employers, and their home base is almost always a home of a quality way above the average residence in large cities on or near the coast.  In other words, they have absolutely none of the financial disadvantages faced by genuine remote area residents (and are in fact better off financially than the average city resident).  At present miners only have to spend 182 days over 2 years in a remote area to be eligible for the Zone Tax Offset – clearly a ridiculous situation.

The October 2008 A.R. Fullarton submission to the Australia’s Future Tax System Review is an excellent summary of the issues concerning the Remote Area Zone Tax Rebate system.  For example the writer quite rightly points out that residents of large cities such as Darwin and Townsville should no longer be eligible for any Remote Area Zone Tax Rebate, nor should fly-in fly-out miners; and that these savings (from a lot of people claiming small amounts) could be spent on raising the taxation rebate for genuine remote residents (a much higher amount going to a small number of people).  This Tax Review submission can be accessed on this page.

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