That used to be call an ANR203 Exemption pre 1988. Some Reg 203 air services even attracted Government subsidies through the RASS scheme. Sunnies, Eastern, Kendal and Hazos were all originally Reg 203 services.
Problem is that it was the perfect solution to appropriate and viable rural community air services - so CASA removed it from the post 1988 CARs, leaving a meaningless CAR206.
As a result over 100 rural communities across Australia lost their air services, so I guess CASA achieved their goal!
I don't believe any rural community expects anything more than a safe, reliable and appropriate air service, which most communities have now lost.