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Edited version of private ruling

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Ruling

Subject: Zone Tax Offset

Question

Are you entitled to the zone tax offset?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You are an Australian resident for tax purposes.

You currently reside in a small town in Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 79A.

Reasons for decision

Summary

The town you live in is not within a relevant area in tax Zone A or Zone B. Therefore, you are not entitled to the zone tax offset.

Detailed reasoning

Ordinary zone tax offset

A zone tax offset is provided under subsection 79A(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for individuals who are residents of certain areas which are subject to uncongenial climatic conditions, are isolated, or where the cost of living is high. These areas are comprised of two zones - Zone A and Zone B. Zone A comprises those areas where the above factors are more pronounced whilst Zone B comprises the less badly affected areas.

For the purposes of the zone tax offset, Zone A and Zone B are defined at subsection 79A(4) of the ITAA 1936 to mean the area described in Part I and Part II of Schedule 2 to the ITAA 1936. The areas described in Schedule 2 to the ITAA 1936 generally refer to the mainland of Australia and islands forming part of Australia.

The Tax Office Australian Zone List (the List) is also used when considering an individual's entitlement to the zone tax offset. The List is used when determining whether an area is in Zone A or Zone B, a special area in either Zone A or Zone B or in no zone.

In order for an individual to be eligible for a zone tax offset, the person must satisfy one of the residency tests as outlined in subsection 79A(3B) of the ITAA 1936. The tests include the following:

§ the individual resided in the zone for more than one-half of the year of income,

§ the individual was actually in the relevant area for more than one-half of the income year, or

§ in the circumstances stated in paragraph 79A(3B)(d) or 79A(3B)(e) of the ITAA 1936, he or she resided or was actually in the relevant area for more than 182 days in two consecutive years of income.

Application of Ordinary zone tax offset

The town you live in is not an area described within Part I and Part II of Schedule 2 to the ITAA 1936, and therefore is not an area in Zone A or Zone B as defined at subsection 79A(4) of the ITAA 1936.

Your home is not on the Australian Zone List as being in a Zone A or Zone B area.

Therefore, you are not entitled to the zone tax offset under section 79A of the ITAA 1936, as you have not satisfied your residence requirements contained in subsection 79A(3B) of the ITAA 1936. This is because the town you live in is not within a relevant area.

Special zone tax offset

Where a taxpayer lives in a particularly isolated area in either of the two zones, a special category of zone allowance is available - special Zone A, and special Zone B.

Under subparagraph 79A(3D)(a)(i) of the ITAA 1936, the special area within Zone A or B is constituted by:

Under subsection 79A(3E) of the ITAA 1936, the Commissioner has a discretion to treat a point that is not in a special area in that zone but is adjacent to or in close proximity to the special area as being a point in the special area of that zone.

Application of Special Zone tax offset

In your case, as explained above, the town you live in is not an area described in Part I and Part II of Schedule 2 to the ITAA 1936, and therefore is not an area in Zone A and Zone B as defined at subsection 79A(4) of the ITAA 1936.

As you do not live within Zone A or B, the Commissioner is unable to use the discretion available under subsection 79A(3E) of the ITAA 1936.

Therefore, you are not entitled to the special category of zone allowance under subparagraph 79A(3D)(a)(i) of the ITAA 1936.

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