Edited version of your written advice

Authorisation Number: 4110042736555

Date of advice: 11 January 2018

Ruling

Subject: Point that falls within a special area in either Zone A or Zone B

Question

Is your community in State B a point that falls within a special area in either Zone A or Zone B?

Answer

No

This ruling applies for the following periods:

Period ending XX June 20XX

Period ending XX June 20XX

The scheme commences on:

XX July 20XX

Relevant facts and circumstances

You live in a community in State B

This community is designated Zone A.

The distance from your community to town A is XXX km

The distance from your community to town B is XXX km

The distance from town A to town B is XXX km

The distance from your community to an airport is XXX km

The airport is in town B

Town B is designated Zone A special area.

The surface route to your community is not frequently closed due to climatic conditions.

There are no hospital services in your community.

There is medical support through volunteer ambulance and a nursing sister, and a doctor available once a fortnight.

Medical support is also provided by Skype consult and the Royal Flying Doctor Service (RFDS).

You have postal services that deliver mail to a community post office, though all post office services are not available through this outlet.

There are no government department outlets.

There are two General stores – costs of goods are at a premium.

There is an unmanned Service Station but no mechanical support.

Your community has an ATM only – no other banking facilities.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 79A

Income Tax Assessment Act 1936 Subsection 79A (1)

Income Tax Assessment Act 1936 Subsection 79A (2) (a)

Income Tax Assessment Act 1936 Subsection 79A (3D) (a)

Income Tax Assessment Act 1936 Subsection 79A (3E)

Income Tax Assessment Act 1936 Subsection 79A (4)

Income Tax Assessment Act 1936 Schedule 2

Reasons for decision

Section 79A of the Income Tax Assessment Act 1936 (ITAA 1936) provides a tax offset for residents of defined isolated areas.

A zone tax offset is available for people who live in the defined geographic zones. 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 prescribed areas which are subject to uncongenial climatic conditions, are isolated, or where the cost of living is high. These remote areas are called Zone A and Zone B.

If a person is a resident in the special area in Zone A or Zone B, paragraph 79A (2) (a) of the ITAA 1936 provides a higher amount of rebate than for a resident in either of those zones. 'Special area' within Zone A or Zone B is defined in paragraph 79A(3D)(a) of the ITAA 1936 as being points in that Zone situated in excess of 250 kilometres by the shortest practicable surface route from the centre point of the nearest urban centre with a census population, from the 1981 census, of 2,500 or more.

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 generally refer to the mainland of Australia and islands forming part of Australia.

Under subsection 79A(3E) of the ITAA 1936 the Commissioner has a discretion to treat a point in either zone A or zone B 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.

Taxation Ruling TR 94/27 outlines the circumstances in which the Commissioner will apply subsection 79A (3E). This ruling states that where individuals live on either side of the XXX kilometre dividing line, the adjacent or close proximity test in sub-section 79A (3E) should be used to provide consistent treatment between the individuals concerned. The operation of the sub-section is not intended to be used to allow the special area zone rebate to cases other than borderline cases.

As your community is XXX kms from town A and within the XXX km radius your community is not considered to be a borderline case for the adjacent or close proximity test.

The Commissioners’ discretion may also be exercised in cases of extreme isolation and hardship. TR 94/27 states that the following combination of factors, although not an exhaustive list, may constitute extreme isolation or hardship;

● the only surface route is frequently closed by climatic conditions;

● no medical or hospital services are in the area;

● the only means of communication is a weekly mail service or radio telephone.

The above combination of factors is based on a Board of Review decision where the Board decided that an extreme degree of isolation and hardship experienced by a taxpayer warranted the exercise of the Commissioner's discretion. In this Board case the only surface route was a four wheel drive track which was frequently closed by climatic conditions.

Based on the facts supplied it is not considered that your community is in a situation of extreme isolation and hardship. There are roads to and from your community which allow relative easy access to the area. The roads are not frequently impassable due to climatic conditions.

Your community has access to telephones, facsimiles and e-mail, medical support and has regular mail services. The fact that your community doesn't have hospital services would not allow the Commissioner to use his discretion to allow a special zone rebate under 79A (3E) of the ITAA 1936.