Edited version of private advice

Authorisation Number: 1052174166328

Date of advice: 27 September 2023

Ruling

Subject: Tax offset - remote zone rebate

Question

Am I eligible for the Tax Zone Offset?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2022

The scheme commenced on:

1 July 2021

Relevant facts and circumstances

You are employed with XX XX and work at sea on board a ship, mostly in the areas around XX XX and XX XX.

You work a roster of 31 days on and 30 days off. Generally, you are on the ship for 30 days at a time.

You fly to the ship from mainland Australia and embark from XX XX. On occasion, the ship transits between XX XX and the XX XX. On occasion, the ship also departs from the mainland for sailing to either XX XX or XX XX.

During the 20XX financial year, you spent 130 days in the XX and XX XX region. For the 20XX and 20XX financial years combined, you spent over 200 days offshore in this area.

You rent a residence in XX where you live with your spouse and children.

You fly-in and out of XX for the purposes of work. You stay on board ship while you work, and this accommodation is provided for and owned by your employer.

You receive and allowance from your employer for work undertaken offshore while at sea.

Relevant legislative provisions

Income Tax Assessment Act 1936 (ITAA 1936) section 79A

Tax and Superannuation Laws Amendment (2015 Measures No. 5) Bill 2015. Explanatory Memorandum

Reasons for decision

The Zone Tax Offset (ZTO) is a non-refundable tax offset available to taxpayers who reside in specified remote zones.

The ZTO is intended to compensate recipients for the disadvantages of living in remote areas including distance, uncongenial climate and the higher cost of living.

There are two designated Zones for claiming the ZTO, Zone A and Zone B, as well as 'special areas' (representing particularly isolated areas) within these Zones.

The intention of the ZTO, for which it is designed, is to compensate for the difficulties associated with living in a remote area.

The eligibility for the zone tax offset changed from 1 July 2015. Under the new law, to be eligible for the Zone Tax Offset, a taxpayer's usual place of residence must be within a prescribed area (Zone). That is, 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 Income Tax Assessment Act 1936 (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 they had 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 94/27 Income tax: zone rebate for residents of isolated areas (TR 94/27) provides factors to be considered by the Commissioner in determining whether a person resides in a zone area. Paragraph 8 of TR 94/27 outlines these factors which include, amongst others, 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.

Example: Levi is an engineer who lives in Adelaide. He flies to Alice Springs for twelve day shifts at an engineering firm and then travels back to Adelaide for his days off (which vary between four and eight days in a row). As Levi does not have his usual place of residence within a prescribed Zone, even though he is in Alice Springs for 183 days or more, Levi is unable to claim the ZTO (Explanatory Memorandum to Tax and Superannuation Laws Amendment (2015 Measures No. 5) Bill 2015. Chapter 2 - Better targeting of the Zone Tax Offset, example 2.3).

Based on the facts, your usual place of residence is in XX. You are not a resident of zone A (special area) XX or XX XX for the purposes of the Zone Tax Offset.

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