Tax break at odds with plans to grow north
It is abundantly clear to me that sometimes the main hurdle for regional Australia is the lack of co-ordination between the various tiers or departments of Government.
I have submitted a report to the Productivity Commission, and wish to outline one of the main arguments we have made in our submission.
It’s cheaper per kilometre to travel from Perth to London than it is to travel from Perth to Karratha. Why is this acceptable? There is an inherent inconsistency in allowing a fringe benefits tax exemption for fly-in, fly-out arrangements on the one hand, and a desire to unlock the north and diversify regional economies on the other.
The exemption distorts the airline market.
It makes FIFO arrangements artificially cheaper (and thus viable), which crowds residents and local business owners out of their own airports.
Why, at a time when the budget is stretched to capacity to deliver important infrastructure, defence and health initiatives, would the Federal Government allow mining companies to avoid a tax that other Australian corporations and small businesses must shoulder?
If your goal is to diversify regional economies, why incentivise capital-city based FIFO workforces over local labour?
Local government has done the right thing by supporting small business development, advocating for better telecommunications, and investing their own funds in tourism and other areas of the local economy.
The State Government has done the right thing, too; it’s poured billions into developing a diverse Pilbara economy with vibrant communities.
Even the Commonwealth Department of Infrastructure and Regional Development is doing the right thing.
I regret to inform you that it seems Treasury has missed the memo.
Treasury’s tax concessions result in airlines charging higher than normal prices because mining companies provide a reliable stream of patrons, and are freed of the FBT burden. This keeps the planes regular, but half-empty.
Most major flight routes are not viable unless they are more than 75 per cent full. The flights to these FIFO-heavy regions regularly fly as low as 50 per cent full.
This is not a failure of corporate Australia. To be clear, both the mining companies and the airlines are doing their duty to their shareholders.
The Productivity Commission has clearly recognised there is an issue here, launching an inquiry into transitioning regional economies.
While we welcome this inquiry, we also call on Prime Minister Malcolm Turnbull to ensure all of Government actively participates in this inquiry.
Only with all levels of Government working together will we be able to fully unlock the vast potential of the north.
Lynne Craigie has written to the Productivity Commission, calling the FBT exemption for FIFO arrangements into question.