Edited version of private advice

Authorisation Number: 1051811698384

Date of advice: 12 March 2021

Ruling

Subject: Zone tax offset

Question

Are you eligible to a special area Zone A tax offset for the period you were living and working in X?

Answer

Yes

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 Australian Tax Office (ATO) Australian Zone List includes Y in Zone B and X in a special area in Zone A.

The eligibility for the zone tax offset changed on 1 July 2015. Under the new law, individuals 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.

For an individual to be eligible for a zone tax offset, they must satisfy one of the residency tests as outlined in subsection 79A(3B) of the ITAA 1936. These tests are:

a) the taxpayer had their usual place of residence in the relevant area for more than one-half of the year of income

b) the taxpayer died during the income year and at the date of death their usual place of residence in the relevant area

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 the relevant area for more than 182 days in two consecutive years of income.

Taxation Ruling TR 94/27 Income tax: zone rebate for residents of isolated areas provides factors to be considered by the Commissioner in determining whether a person resided in a zone area. Paragraph 8 of TR 94/27 outlines these factors which include the intended and actual length of stay in the area, the establishment of a home in the area, the existence of a residence outside the area and the durability of association with the relevant area.

The amount of the zone rebate allowable is determined by subsection 79A(2). That subsection fixes the rebate in several situations in paragraph 79A92)(a) to (e). Paragraph 79A92)(f) provides that the amount of the rebate allowable, in all situations not covered by paragraphs 79A(2)(a) to (e), is an amount the Commissioner considers reasonable in the circumstance.

In your case, we are satisfied you are entitled to a zone rebate as you met the residency test in paragraph 79A(3B)(a) of the ITAA 1936. You resided in a relevant area from XX/XX/XXXX, being more than one-half of the year of income. For the purpose of the residency tests, the relevant area includes any zone area.

You moved to X on XX/XX/XXXX. In order to determine if you resided in X, thus qualifying for the special area rebate, we analysed your circumstances against the factors outlined in paragraph 8 of TR 94/27. Whilst you maintain a residence in Y, we are satisfied that when you moved to X for employment, you also became a resident of X.

As you had your usual place of residence in two zone areas, paragraph 79A(2)(f) provides you will be allowed such a rebate the Commissioner considers reasonable in the circumstances. In practice, you are allowed a rebate calculated on a proportionate basis according to the number of days spent in Zone B (Y) and the number of days spent in special area in Zone A (X).

The Zone or overseas forces tax offset calculator can assist you in calculating the zone rebate allowable. The calculator can be found by entering Quick Code reference QC 17599 into the search function of the ATO website, ato.gov.au.

This ruling applies for the following period

Year ending 30 June 2020

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You and your partner own a house located in Y.

You worked in Country A until XX/XX/XXXX then returned to Y.

You then commenced employment with Company Z.

Your Employer provided a letter dated XX/XX/XXXX advising you are an employee since XX/XX/XXXX and you reside in staff accommodation at X

Your Employer provided a signed Letter of engagement dated XX/XX/XXXX which shows you are required to perform your duties in X and your salary includes accommodation at X and return flights to Y per year.

Your Employer provided a copy of a signed ongoing lease agreement.

You incurred expenses to furnish accommodation at X.

You pay for the electricity service at the accommodation at X and provided Tax Invoices.

You provided flight tickets showing a return trip to Y.

You provided flight tickets for your partner showing a return trip to X.

You provide a copy of your Driver Licence showing your address as X.

You provided a copy of your Australian Electoral Commission enrolment indicating your address is located at X and the Local Government Area electorate you will vote in is Town X.

You have no sports or leisure affiliations or membership in Y.

You provided a copy of your Golf Link card showing you are a full member of X Golf Club.

You have personal and household effects in X.

You provided a copy of your motor vehicle Registration Certificate indicating concessions applies for Restricted Area.

Your partner remained in Y as there is no suitable employment in X.

You intend to remain living and working in X whilst you are employed in X.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 79A

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).