Private ruling: Zone tax offset - special zone - discretion
Published: September 2012
Ruling period: Year ended 30 June 2008 | Year ended 30 June 2009 | Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2007

Ruling: Q1: Can you claim a special zone B tax offset under the Commissioner's discretion in subsection 79A(3E) of the Income Tax Assessment Act 1936 ? | A1: No

Relevant facts and circumstances: You live at a remote station, which is approximately Xkm from the closest township, which in turn is located Y kilometres by road from the nearest centre with a population of more than Z as per the census taken on 30 June 1981. Approximately 100 kilometres of the road is bitumen and the remainder is dirt. The population of the closest township is approximately ten. During periods of heavy rainfall, the township can be cut off because the road is impassable. In times of severe flood the station can be completely isolated for several months. Mail is delivered twice weekly but is more intermittent during flood events. Telephones services are via radio telephone, and there is no mobile telephone coverage. Facsimile and e-mail services are available. The nearest medical facilities are approximately X kilometres away and any serious illnesses and injuries result in the Royal Flying Doctor Service airlifting patients to medical facilities.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 79A(1), | Income Tax Assessment Act 1936 Subsection 79A(3E) and | Income Tax Assessment Act 1936 Part 1 Schedule 2.

Reasons for decision: Summary: A zone rebate is provided under sub-section 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 or are isolated or where the cost of living is high. These areas are comprised of two zones, zone A and zone B. Where a taxpayer lives in a particularly isolated area in either zone a special category of zone allowance is available. The area covered by zone B is described in Part I of Schedule 2 of the ITAA 1936 and according to this description your residence is situated in zone B. As your residence is less than 250 kilometres by the shortest practicable surface route from the nearest urban centre with a 1981 census population of not less than Z people, your residence is not in the special area within zone B as defined in subsection 79A(3D) of the ITAA 1936. However, 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 250 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 residence is well within the 250 kilometre radius, it 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, it 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 in your correspondence it is not considered that your residence is in a situation of extreme isolation and hardship. There is a road to your residence which is not merely a four wheel drive track. Although the dirt road from your residence to the closest township and beyond may be untrafficable for some periods after rain it is not frequently impassable due to climatic conditions. It is also accepted your residence can be isolated by floodwater, however, these occasions, while lengthy, are not frequent. Your residence has access to telephones, facsimiles and e-mail and has regular mail services except for those times when the property is isolated by floodwater. The fact that your residence doesn't have ready access to hospital services or mobile phone coverage would not allow the Commissioner to use his discretion to allow a special zone rebate under subsection 79A(3E) of the ITAA 1936.

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