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Ruling

Subject: zone tax offset

Question

Are you eligible to claim a zone tax offset in the 2010-11 and 2011-12 financial years?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commences on:

1 July 2010

Relevant facts and circumstances

Your employment requires you to travel through zone B and the special areas. You are in these zone areas for more than 183 days in the income years in question.

You do not reside in a zone area.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 79A.

Reasons for decision

Section 79A of the Income Tax Assessment Act 1936 (ITAA 1936) provides for a zone tax offset for individuals taxpayers who reside or stay in certain areas of Australia.

For a taxpayer to be entitled to a zone tax offset under subsection 79A(1) of the ITAA 1936, the taxpayer must satisfy one of the residence requirements contained in subsection 79A(3B) of the ITAA 1936.

Subsection 79A(3B) provides that a taxpayer is treated as a resident of a particular area, being the prescribed area, Zone A, Zone B, the special area in Zone A or the special area in Zone B in a year of income if:

· they resided in a zone for at least half of the year of income;

· they were actually in a zone for at least half of the year of income;

· they died during the year of income and resided in a zone at the date of death;

· they were in a zone for less than half of each of the current and immediately preceding income years and the total for the two years exceeds 182 days; or

· they resided in a zone for less than half of the current income year and for less than half of an earlier income year, being any of the four preceding income years other than the immediately preceding income year and provided that the number of days for the two years exceeds 182 days and that they resided continuously for those periods in that zone.

The days in excess of 183 from the immediately preceding income year cannot be used when calculating any entitlement for the current income year. The total number of days for each year can only be combined when a taxpayer stays less than 183 days in the zone area in both of those years.

Paragraphs 10 to 12 of Taxation Ruling TR 94/27 state:

For the purposes of section 79A, an individual may be a 'resident' of a relevant area, even though he or she did not 'reside' in the area in the ordinary sense of the word, if the individual was actually in that area, whether continuously or intermittently, for more than one-half of the year of income.

In determining whether a person has resided or actually been in the relevant area for the required number of days, we consider that, for the purposes of the residence test in subsection 79A(3B), the word 'day' includes any one or more parts of a calendar day.

There is no definition of 'day' in the ITAA 1936. Whether a fraction or fractions of a day may be treated as being a whole day depends on the intention and the context of the statute in question. We accept that in its context in subsection 79A(3B), the word 'day' is intended to include a fraction or fractions of a day.

In detailing the calculation of the zone rebate, subsection 79A(3B) of the ITAA 1936 refers to the number of days used in the calculation. This expression is not defined. However, TR 94/27 provides that the word day includes any one or more parts of a calendar day and a calendar day is from midnight to midnight.

In your case, whilst working you were present in zone areas for more than 183 days during the income years in question. You spent part of a day in a zone area and part of a day out of a zone area. The fraction or fractions of a day you spent while driving through a zone qualify for inclusion of the zone tax offset as the word day includes any one or more fractions of a day. However, the 24-hour period commences from midnight to midnight and not from the time you commence work.  

Accordingly, the fraction of a day spent in driving in zone area is regarded as a whole day in a zone area for the calculation of number of days for zone tax offset purposes. As you have spent more than 183 days performing your work in zone areas, you are entitled to claim a zone tax offset.

Paragraph 16 of TR 94/17 states the following:

If an individual satisfies the requirements to be a resident of more than one relevant area, we consider that the individual is entitled to the greater rebate for which he or she qualifies. For instance, if an individual is a resident of Zone B, but has spent more than 182 days in Zone A, he or she will be entitled to claim a Zone A rebate.

You will therefore be entitled to claim the zone rebate for special zone areas.

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