A case for tax reform to attract the workforce needed to support Australia’s mining sector.
The Australian Bureau of Statistics recently reported that for the sixth consecutive financial year, Australia’s resources sector set a new export revenue record totalling $413 billion in FY22 contributing 69% of Australia’s total export revenue.
Given the importance of natural resources to the Australian economy and the challenges faced in attracting workers into areas of Australia which are typically isolated from major cities, it is timely to consider how tax policy reform could be used to help attract the workforce required to support current and future needs of the industry.
At present the challenges are even more acute as Australia faces some of the tightest labour market conditions in decades, resulting in individuals having more choices about where they work.
The isolation of mine sites means that workers in those locations face higher costs of living, with prices of basic food and groceries increasing with remoteness. The scarcity of housing pushes up prices for both owners and renters. Finally, but equally important, is the lack of access to services such as healthcare and childcare.
The Government has long acknowledged the challenges faced by individuals living in remote locations and has used tax concessions to alleviate some of those financial pressures.
Since 1986, Fringe Benefits Tax (FBT) rules have provided certain concessions for employers employing workers in remote areas. To be eligible for some of these FBT concessions, the workers must be located in a ‘remote area’ which is specifically defined based on population figures from the 1981 census.
The FBT concessions include:
- Full exemption for housing owned or leased by the employer in a remote area, provided to an employee as their usual place of residence
- Partial exemption for employer reimbursement of rent or mortgage interest paid by the employee, on housing owned or leased by the employee in a remote area
- Partial exemption for residential fuel and holiday transport expenses for employees located in a remote area
- Temporary accommodation, meals and transport for fly-in fly-out (FIFO) and drive-in and drive-out (DIDO) workers
However the FBT concessions are complicated and, in some cases, difficult to access, which means they fail to achieve their purpose of attracting workers to remote areas. For example, the FBT concession could be made simpler and more accessible by removing the distinction between employer owned/leased housing (full exemption) and employee owned/leased housing (partial exemption).
While the FBT concessions for FIFO and DIDO workers are beneficial, it does not encourage the growth of communities in areas which are staffed mainly by temporary workers. The Government should consider alternatives to provide similar benefits to workers who choose to move to these locations.
In relation to childcare, there is a FBT exemption for childcare which is provided on an employer’s premises, which is not restricted to remote areas. However, the FBT exemption is not available if the employer reimburses childcare expenses paid by an employee at a private childcare centre. An expansion of the FBT childcare exemption to childcare which is not provided on an employer’s premises would help mitigate the childcare costs and potentially support more women in the workforce.
There is currently a FBT exemption where an employer reimburses school fees for children of overseas employees who relocate to Australia. A similar exemption for domestic workers in remote areas would help with the additional costs these workers face.
The Government has demonstrated a willingness to use FBT to drive policy outcomes, by recently amending FBT rules to provide an exemption for electric vehicles.
A similar approach could be taken by the Government to make targeted changes to FBT rules to encourage workers to move to remote areas and support the continued investment in existing and new developments so crucial to Australia’s prosperity.