Private ruling: Special zone tax offset
Published: August 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Question and answer | Are you entitled to a special zone tax offset? | No.

Relevant facts and circumstances: You worked for 68 days in X and Y which are both in the special zone. Your usual home is in Z in zone B.

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 1 November 1981, 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 1981 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. 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: The individual had their usual place of residence in a zone for more than one-half of the year of income The individual died during the income year and at the date of death their usual place of residence was in a zone 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 worked for 68 days in X and Y which are in the special zone. Your usual home is in Z which is in zone B. Your usual residence was not in X or Y and you are therefore not entitled to the special zone offset.