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Edited version of private ruling

Authorisation Number: 1011536735202

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Ruling

Subject: Eligibility for a zone tax offset

Question and answers:

Are you entitled to a zone tax offset?

No.

This ruling applies for the following period

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2009

Relevant facts

You are employed as part of a project that is in a special zone area.

You hold a position on a vessel anchored offshore.

You live and work aboard the vessel for a number of weeks at a time. After your work roster is complete you return to your residence in an area not prescribed as being in a zone for an equivalent amount of time.

Prior to working on the vessel you had never worked or lived in a zone tax offset area.

You intend to remain working on the vessel for an extended period.

You do not receive a remote area allowance.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 79A

Reasons for decision

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. 

To qualify for the zone tax offset, you must have lived or worked in a remote area (not necessarily continuously) for:

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. Schedule 2 of the ITAA 1936 states that certain 'mainland' areas of Australia, as listed, will qualify for a Zone A or B tax offset. While this list also includes a number of islands that form part of Australia and are adjacent to the coastline, it does not include surrounding waters.

Taxation Ruling TR 94/27 considers the eligibility for the zone tax offset for residents of isolated areas, and refers to Case A47 69 ATC 278. In Case A47 69 ATC 278 it was held that that the 'prescribed area' as described in Schedule 2, Part I and Part II of the ITAA 1936, ceases at the coastline and does not include either coastal waters or islands. Therefore, a prescribed area covered by Zone A and Zone B is considered to end at the coastline of mainland Australia and some specified islands, and a person living offshore from a prescribed area is not considered to be residing or spending time in a prescribed zone area.

In your case, you reside and work on board a vessel which is anchored near a special zone area. Although it is listed as a special zone area, as provided under Part. 1 of Schedule 2 of the ITAA 1936, this does not extend to surrounding waters.

Accordingly, you are not considered to be residing in a zone area, and therefore are not entitled to a zone tax offset under subsection 79A(1) of the ITAA 1936.

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