ap_reb12

Zone tax offset

Zone allowance - what is a prescribed area?

Zone allowance - what is a zone resident?

Zone allowance - what is the rebate worth?

Special area of zone A or B

Ordinary area of zone A

Ordinary area of zone B

Reduction for prescribed allowances

Overseas forces rebate and Civilians serving with UN forces

Zone Allowance - What is a Prescribed Area?

Can you think of a rebate which is granted to taxpayers because

the weather is bad,

they are lonely and

their groceries are expensive ????

Section 79 grants a concession to residents of certain areas of Australia (prescribed areas or zones) 'in recognition of' the disadvantages to which they are subject due to

uncongenial climatic conditions

isolation

high cost of living

There are 2 such areas and they are known as Zone A and Zone B.

The areas of Australia encompassed by zone A (darker brown to the north) and zone B (orange brown to the south) and you can read more about them at paragraph 17-270 of the CCH Master Tax Guide. (Did you notice the western side of Tasmania is in zone B?)

But the mauve circles are the 'normal' areas of the zones. The rest of the coloured area are known as special areas - now read on…

One of the factors recognised by the concession is 'isolation', but some areas in the zones will be more isolated than others.

Section 79A(3D) takes this into account by defining 'special areas' within zones.

What makes an area special?

Refer section 79A(3D)

A special area is one that is more than 250 kms from the nearest urban centre

with a population greater than 2500.

The concession is more generous for a taxpayer in a special area than for other zone residents.

Zone Allowance - What is a zone resident?

when is a person a zone resident?

Answer this question….

A taxpayer takes a weeklong holiday in Darwin.

Would he qualify for a zone rebate? (Hint - refer section 79A(3B))

Yes No

Refer section 79A(3B).

We know that a man's residence is his usual place of abode - where he lives with his family and sleeps at night.

But section 79 redefines the term for its own purposes.

If you have a copy of the 1936 Assessment Act, refer to section 79A(3B) now.

5 situations in which it can be said that a taxpayer is a resident of a zone.

Look again at the first two cases

Section 79A(3B)<a> - a resident is a person who resided in the zone for more than half the year.(183 Days)

Section 79A(3B)<b> - a resident is a person who was actually in the zone for more than half the year.(183 Days)

As you will notice the key to residence is the number of days a taxpayer is either

a resident of the zone ... Or

merely present in the zone while living away from his normal place of abode.

He spent less than half the year in the zone.

Answer this question….

Would the following be a zone resident?

A taxpayer has been resident in zone B but dies on 1 august, so he only lives 1 month in the zone. Hint - refer section 79A(3B)<c>

Yes No

Refer section 79A(3B)<c>

Where a death prevents a resident spending the 183 days in the zone, section 79A(3B)<c> treats the deceased as a resident even though he did not live the 183 days in the zone.

Section 79A(3B)<d> deals with the case of a person who is in a zone for a period of 183 days over 2 financial years.

Take the case of someone who moves to a zone in February and stays there until November. This period encompasses 2 financial years and the period of residence is less than 183 days for each year of the 2 financial years, even though it exceeds 183 days over the one calendar year.

Despite its good intentions, section 79A(3B)<d> is a bit long winded, so if you have a copy to the act refer to it now then we will go through it again.

Section 79A(3B)<d> includes in the definition of a zone resident a person ...

Who spent less than 183 days in the zone in the current year.

Who spent less than 183 days in the zone in the previous year.

Who was not a resident of the zone in that previous year.

Who spent more than 182 days in the zone over the 2 years.

Answer this question….

A teacher is sent to a country school in zone A in February and teaches there until 20 December - 150 days in the first financial year and 173 in the next.

Is he a resident in the first year?

Yes No

less than 183 days!!!

Section 79A(3B)<e> allows the same summing operation where the first and last year are up to 5 years apart, if the taxpayer has resided continuously in the zone.

Zone Allowance - what is the rebate worth?

The rebate is made up of 2 components

An amount set down in the Act.

A percentage of the total value of the dependants rebates

(including the 'notional dependants' - refer to the topic on children and students if you don't know what notional dependants are)

If you refer to section 79A(2) you will see 3 amounts mentioned there - check them out.

Special area in zone A		$1173
Special area in zone B	$1173
zone A (not special area)		$ 338
zone B (not special area)		$ 57

So the calculation starts with the base figure, but then we add the percentage of the something called the relevant rebate amount

The relevant rebate amount includes

Notional rebates for children ($282) and students ($376) are added

The indexed notional with child dependent spouse rebate - we add $263 NOT $128 for to the base amount for a spouse if a child is being cared for.

(If you want to know why, it's all in the definition of relevant rebate amount. That definition tells you to ignore the changes made by Tax Law Amendment Act 3 or 94 which stopped the 'with child' amount for spouse amount being indexed. That amending Act stopped the indexation of the 'with child' amount for a spouse, so it has remained at $128. The 'with child' amount for child housekeeper continued to be indexed so it is now $263. Because we are told to ignore the cessation of indexation for the spouse, the with child amount for the relevant rebate amount is $1587, not the $1452 it would be for the spouse rebate.)

The spouse claim is NOT reduced by the amount of Parenting Allowance payments received

Special area in zone A	50% of relevant rebate amount
Special area in zone B	50% of relevant rebate amount
zone A (not special area)	50% of relevant rebate amount
zone B (not special area)	20% of relevant rebate amount

So you get the zone rebate amount plus the specified percentage of the dependants rebates

Lets put the total value of the rebate in tabular form

Special area in zone A	$1173 + 50% of relevant rebate amount
Special area in zone B	$1173 + 50% of relevant rebate amount
zone A (not special area)	$ 338 + 50% of relevant rebate amount
zone B (not special area)	$ 57 + 20% of relevant rebate amount

Now lets work through section 79A(2) again

79(2)(a) special area of zone A or B

$1173 + 50% of relevant rebate amount

Answer this question….

Resident of special area of zone A

Work out the zone rebate for such a taxpayer with

a dependent wife ($1587),

2 year old child ($376)

Total dependants rebates = $1963.

$1173 + 981 ( 50% of $1963 - dependants claim) = of $2154

Section 79A(2)(d) zone A (not special area)

$338 + 50% of relevant rebate amount

Answer this question….

Resident of ordinary area of zone A

Work out the zone rebate for such a taxpayer with

a dependent wife ($1587),

2 year old child ($376)

Total dependants rebates = $1963.

$338 + 981 ( 50% of $1963 - dependants claim) = $1319

Section 79A(2)<e> zone B (not special area)

$57 + 20% of dependants rebates

Answer this question….

Resident of ordinary area of zone B

Work out the zone rebate for such a taxpayer with

a dependent wife ($1587),

2 year old child ($376)

Total dependants rebates = $1963.

$57 + 392 ( 20% of $1963 - dependants claim) = $449

Section 79A(2)<f> In other cases the Commissioner can allow a reasonable rebate.

This would happen where the taxpayer spent periods in both zone A and B (not special areas).

In such cases the usual course would be

1. Calculate the rebate if the taxpayer spent the full year in each location.

2. Calculate the proportion of the time spent in the area to the full year.

3. Allow that proportion of the full rebate.

Reduction for prescribed allowances

Section 79 (2A) says you must deduct from the amount of the zone rebate you would otherwise be allowed, any payments received under the following allowances

remote area allowance(Social Security Act 1991, Part 8 of the Student and Youth Assistance Act 1973 or the Veterans' Entitlements Act 1986)
farm household support payment ( amounts equivalent to job search or newstart allowance)

Section 79B - Overseas Forces Rebate

A rebate similar to the zone A (ordinary area) rebate is allowed to members of the Australian defence forces serving in specified localities overseas.

You will find these listed at paragraph 17-310 of the CCH Master Tax Guide.

There is a significant difference. The zone allowance tends to be all or nothing. If you do not spend the 183 days in the zone you are not a resident, so you get no rebate. The overseas forces rebate is allowed as a proportion of the full amount if the days in the area are less than 183.

In fact if you die on while in the area you get the full rebate, regardless of how long you were there.

You can also add the time you spent in the zone A or B to the days overseas

However you can not include time spent with UN Forces for which the income was exempt from income tax.

Section 23AB(7) provides a similar rebate to prescribed civilian personnel contributed by Australia to an armed force of the United Nations. Refer paragraph 17-320 - CCH Master Tax Guide.