The zone tax offset recognises the isolation, high cost of living and harsh climate endured by those living in certain remote parts of the country.
But taxpayers needed only to reside or work in these particular zones for more than 183 days a year to be eligible for the offset, and the federal government says about 20 per cent of people claiming the benefit do not live there full-time.
"Many of these are FIFO workers who do not face the same challenges of remote living that zone tax offset was deigned to address," the budget papers said.
FIFO workers will be excluded from the scheme from July 1, a move that will deliver an estimated $325 million boost to government revenue over four years.
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