Private ruling: Zone Tax Offset
Date of advice: 6 January 2017
Published: June 2017
Ruling period: Year ended 30 June 2017
Date scheme commenced: 1 July 2016

Ruling: Question and answer: | Are you entitled to claim the zone offset? | No.


Relevant legislative provisions: Income Tax Assessment Act 1937 section 79A

Reasons for decision: Summary: Section 79A of the Income Tax Assessment Act 1936 (ITAA 1936) provides for a tax offset for individual taxpayers who reside or stay in certain areas of Australia. The amount of the tax offset allowable depends on whether the taxpayer is a resident in Zone A or Zone B or in a special area within each of those zones. For a taxpayer to be entitled to a zone tax offset the taxpayer must satisfy one of the residence tests. An individual is a resident of a particular area, being a prescribed area, Zone A, Zone B or a special area within either of those zones if the individual satisfies one of the tests in paragraphs 79A(3B)(a) to 79A(3B)(e) of the ITAA 1936. These tests depend on where the individual 'resided' during the period or at the time specified in those paragraphs and are outlined below: ● The individual resided in the zone for more than one-half of the year of income. ● The individual was actually in the relevant area for more than one-half of the income year. ● The individual died during the income year and at the date of death resided in the relevant area. ● In the circumstances stated in paragraph 79A(3B)(d) or 79A(3B)(e) of the ITAA 1936, he or she resided or was actually in the relevant area for more than 182 days in two consecutive years of income. A tax offset is available only to a person who resides, or spends time in a prescribed area. The prescribed areas, referred to as Zone A and Zone B are specified in Schedule 2 of the ITAA 1936. These areas are defined as areas of mainland Australia, as well as specified islands off the Australian coastline. Taxation Ruling TR 94/27 considers eligibility for the zone tax offset for residents of isolated areas. Taxation Board of Review No. 3 in Case P82 , 82 ATC 399; Case 14 26 CTBR (NS) 111 found that a deckhand on a prawn fishing boat who was at sea for approximately six days to each one spent in port could not be said to be a resident of a prescribed area as defined in subsection 79A(4) of the ITAA 1936. Accordingly, a person living on a vessel that is located offshore is not residing or spending time in a prescribed area, and as such does not qualify for a zone rebate. In your case, the time you spend residing on a vessel at sea cannot be used in the calculation of your eligibility for the Zone tax offset as the vessel is neither part of the mainland nor an island.

Relevant facts: You are an employee on a ship. | The ship travels between Australia and country A. | The ship is at sea 93% of the time. | The ship is only stationary during cargo loading or cargo discharge, which takes approximately 18 hours in both instances. | Trip lengths can vary usually ranging between 6-8 weeks away and 6-8 weeks at home.