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Ruling
Subject: Zone tax offset
Question
Is a zone tax offset available with respect to residing in Town A?
Answer: No.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You live and work in Town A.
Town A is not within a zone area for the purposes of the zone tax offset.
You have requested that Town A be treated as being in a zone area for the purposes of the zone tax offset.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 79A
Reasons for decision
Summary
There is no discretion in the income tax law for the Commissioner to extend the zone boundaries to treat a point which is not located within a zone area as being in a zone. The zone boundaries are set out in the income tax law and Town A is not within these boundaries. The Commissioner has no discretion to change the boundaries to treat Town A as being within a zone area.
Detailed reasoning
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 of the ITAA 1936. The areas described in Schedule 2 of the ITAA 1936 refer to certain parts of the mainland of Australia and islands forming part of Australia.
A location in Zone A or B that is particularly remote may be considered to lie in a special zone area. Special zone areas attract a higher rate of zone tax offset than the 'ordinary' area of Zone A or B.
In order for an individual to be eligible for a zone tax offset, a taxpayer must satisfy one of the residency tests as outlined in subsection 79A(3B) of the ITAA 1936. These tests are:
· 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
· the individual died during the income year and at the date of death resided in the relevant area
· 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.
In your case, you work and reside in Town A. We accept that Town A may be remote in respect of distance from the nearest urban centre. However, Town A is not an area described within Part I and Part II of Schedule 2 of 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.
The ITAA 1936 provides the Commissioner with some discretion to treat a point in close proximity to a special area of a zone as if it were within that special zone area for the purposes of zone tax offsets under section 79A of the ITAA 1936. Subsection 79A(3E) of the ITAA 1936 (which provides that discretion to the Commissioner) is applicable specifically only to points already within the ordinary area of either Zone A or Zone B and lying in close proximity to the special area of those zones. This discretion however, is not available to the Commissioner to bring a point lying outside of a zone into the ordinary area of either Zone A or Zone B.
Consequently, you are not entitled to a zone tax offset.