Private ruling: Zone tax offset
Date of advice: 9 December 2016
Published: May 2017
Ruling period: Year ended 30 June 201X
Date scheme commenced: 1 July 201X

Ruling: Q1: Are you entitled to a zone tax offset? | A1: No

Relevant facts and circumstances: You and your spouse were employed by a company. The workplace was located in X You and your spouse signed two short term contracts. The first contract was for a period of time in 201X. The second contract was for a period of time in 201X. Your employment location shut down for couple of months during the 201X financial year. You and your spouse lived in an accommodation on site in X. The accommodation was owned and provided by your employer. There was no formal rental agreement. The accommodation had a bathroom. The accommodation did not have a kitchen. You and your spouse had exclusive use to the accommodation. Your accommodation in X remained vacant during your absence in the shutdown. You have a residence in Y. Your residence in Y has been left vacant because you need somewhere to stay during the shutdown. You lived in your residence for a couple of weeks during the 201X financial year. Some of your mail was addressed to you in X. Any mail addressed to Y was redirected to X. You keep your household effects in your residence in Y. You keep your personal effects in your residence in Y.

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. A location in Zone A or Zone B that is particularly remote may be considered to lie in a 'Special Zone' area. Special Zone areas attract a higher rate of zone tax offset than the 'ordinary' area of Zone A or Zone B. The term 'Special Zone Area' is defined as being those points in Zone A or Zone B that were not, as at late 198X, situated 250 kilometres or less by the shortest practicable surface route from the centre point of the nearest urban centre, with a census population from the 198X census of not less than 2,500 (subsection 79A (3D) of the ITAA 1936). However as mentioned above, for the 'Special Zone' area offset to apply your site must first be located in either Zone A or Zone B. 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 to assist in 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. From the list, X lies within the Special Zone A area, while Y is not in a zone area. In addition, the eligibility for the zone tax offset changed on 1 July 2015. Explanatory memorandum of Tax and superannuation laws amendment (2015 measures No. 5) Bill 2015 explains the change of the zone tax offset. Under the new law, taxpayers will be taken to be a resident of the area incorporating their usual place of residence rather than being considered a resident of the area incorporating their place of employment should that area be located within a zone or a special area of a 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 had their usual place of residence in a zone for more than one-half of the year of income b) the individual died during the income year and at the date of death their usual place of residence was in a zone c) in the circumstances stated in paragraph 79A(3B)(d) or 79A(3B)(e) of the ITAA 1936, he or she had their usual place of residence in a zone for more than 182 days in two consecutive years of income. In summary, to be a resident of a zone a person's usual place of residence must be in a zone. Taxation Ruling TR 94/27 Income tax: zone rebate for residents of isolated areas provides the factors taken into account by the Commissioner in determining whether a person resided in a zone area include the intended and actual length of stay in the area, the establishment of a home in the area and the existence of a residence outside the area. In your case, you have a residence in Y. Your property in Y has been left vacant because you need somewhere to stay during the shutdown. You lived in an accommodation on site in X. The accommodation was owned and provided by your employer. Therefore, you did not establish a home in X, and your usual place of residence is still in Y. Thus, you are not entitled to a zone tax offset.