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

Ruling: Q1: Do you work in a zoned area for the purposes of the zone tax offset? | A1: No.

Relevant facts and circumstances: You work under a fly-in, fly-out arrangement on Island X. You have worked for more than 183 days in the financial year on Island X.

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

Reasons for decision: Summary: Section 79A of the Income Tax Assessment Act 1936 (ITAA 1936) provides a tax offset (formerly called a rebate) for individuals who are classed as residents of specified remote areas of Australia which are subject to uncongenial climatic conditions, are isolated, or where the cost of living is high. These remote arrears are classed as either zone A or zone B. There are also special areas within these zones. Special zone areas attract a higher rate of zone tax offset than the 'ordinary' area of Zone A or Zone B. 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 of mainland Australia and Tasmania covered by Zones A and B are generally in the west, north and centre of Australia. Special areas of Zone A include Macquarie Island, Norfolk Island, Cocos (Keeling) Islands, Christmas Island, Heard Island, McDonald Islands, Lord Howe Island and the Australian Antarctic Territory. Zone B also covers islands forming part of Australia that are adjacent to the coastline of the portions of the mainland and Tasmania. Special areas of Zone B include King Island (TAS) and the Furneaux Group of islands (TAS). The amount of the tax offset allowable depends on whether the taxpayer lived, or worked for the required period of time in zone A, zone B or in a special area within each of those zones. We accept that Island X may be remote in respect of accessibility and the lack of services. However, Island X does not lie adjacent to the coastline of an area described in Part I or Part II of Schedule 2 of the ITAA 1936, nor is it an island that is individually mentioned within the legislation. Therefore, Island X is not in a zoned area as defined in subsection 79A(4) of the ITAA 1936. The income tax law provides the Commissioner with some discretion to treat a point near to a special area of a zone as if it were within that special zone area. However this discretion, which is provided by subsection 79A(3E) of the ITAA 1936, is applicable specifically only to points already within either zone A or zone B. 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 Island X is not within these boundaries. The Commissioner has no discretion to change the boundaries to treat Island A as being within a zone area. Consequently, as Island X is not in a zone, you are not entitled to a zone tax offset.