Private ruling: Zone tax offset
Published: August 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a special zone B tax offset? | A1: No. | Q2: Are you entitled to a zone B tax offset? | A2: Yes.

Relevant facts and circumstances: You were located at a site which is situated approximately 160 km from the nearest centre which had a population in excess of 2,500 people as at dd/mm/yyyy. You were located at the site for more than 183 days in the year.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 79A

Reasons for decision: Summary: 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 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 a taxpayer'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, a taxpayer must satisfy one of the residency tests as outlined in subsection 79A(3B) of the ITAA 1936. These tests are: a) the individual resided in the zone for more than one-half of the year of income b) the individual was actually in the relevant area for more than one-half of the income year c) the individual died during the income year and at the date of death resided in the relevant area d) 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 were located at the site for more than 182 days. Part II of Schedule 2 of the ITAA 1936 describes the areas included in zone B. The site is included in zone B. You may be eligible for a higher amount of tax offset if you reside in the special area within zone B. The special area within zone B is described in subsection 79A(3D)(a) of the ITAA 1936 as: 'the points in that Zone that were not, as at 1 November 1981, situated at a distance of 250 kilometres or less by the shortest practicable surface route from the centre point of the nearest urban centre (whether or not within that Zone) with a census population of not less than 2,500' For the purposes of the 'shortest practicable surface route' requirement in paragraph 79A(3D)(a) of the ITAA 1936, the expression 'surface route' is defined in subsection 79A(4) of the ITAA 1936 to mean a route other than an air route. This ordinarily means a route (wholly or partly) across land or across water. According to the 19XX census, the closest urban centre to the site that had a population of 2,500 or more is approximately 160 km by road from the site. As such, it is not considered to be in special zone B. As the site is considered to be in Zone B and you work in the zone for more than 183 days, you are entitled to a zone B tax offset.