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Edited version of your written advice
Authorisation Number: 1013028525218
Date of advice: 3 June 2016
Ruling
Subject: Zone tax offset
Questions and answers
1. Do you work in either a Zone A or special Zone A area for the purposes of the zone tax offset?
No
2. Is a zone tax offset available to you when working on an offshore facility?
No
This ruling applies for the following period
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commenced on
1 July 2014
Relevant facts and circumstances
You work full time on an offshore vessel.
The facility is located in water just over XXXkm from a town which is in Zone A.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 79A
Income Tax Assessment Act 1936 Subsection 79A(1)
Income Tax Assessment Act 1936 Subsection 79A(4)
Income Tax Assessment Act 1936 Subsection 79A(3E)
Reasons for decision
A zone tax offset is available under section 79A of the Income Tax Assessment Act 1936 (ITAA 1936) 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. There are also special areas within Zone A and Zone B. Special zone areas attract a higher rate of zone tax offset than the 'ordinary' area of Zone A or Zone B.
Accordingly, a person living on a boat that is at all times located offshore is not residing or spending time in a prescribed area, and as such does not qualify for a zone tax offset.
This view has been supported by the Board of Review in Case P82, 82 ATC 399. This case is also summarised in Taxation Ruling TR 94/27 entitled Income tax: zone rebate for residents of isolated areas, at paragraphs 51 and 52, which state:
51. The case involved the determination of the place of residence of a taxpayer. The evidence disclosed that the taxpayer was a deckhand on a prawn fishing boat operating out of Groote Eylandt. Throughout the year of income the taxpayer lived on board the boat and did not own, rent or maintain a house or other form of residence on the island or on the mainland. The evidence further disclosed that throughout the year under review, the boat was at sea for approximately six days to each one spent in port.
52. A majority of the Board considered the fishing boat to be the taxpayer's place of residence. Since the boat was at sea for more than one half of the year of income and therefore outside the zone area, the taxpayer could not be said to be a resident of a prescribed area as defined in former subsection 79A(4). In the result no rebate was allowable.
Subsection 79A(2)(f) of the ITAA 1936 provides the Commissioner with a discretion on the amount of tax offset which he considers reasonable. It does not, however, provide discretion to allow a tax offset in circumstances where the legislation does not provide for any.
In Case Z40 92 ATC 361, the AAT considered whether the Commissioner's discretion under section 79A(3E) of the ITAA 1936 to treat an area "adjacent to or in close proximity to the special area" should be exercised in the case of an offshore location. In that case the taxpayer had spent time offshore on a natural gas drilling and production platform, situated on the North West Shelf.
The tribunal found that the discretion could not be exercised, as that discretion only provides for the Commissioner to treat an area that is within a Zone as being within a "special area" of that zone, it does not enable the Commissioner to treat an area that is outside of a zone area as being in a zone area.
Conclusion
In your case, whilst you are living and working on a facility which is located offshore you are not within a zone area. There is no discretion in the income tax law for the Commissioner to extend the zone boundaries to treat a point which is not located within a zone area as being in a zone. The zone boundaries are set out in the income tax law and offshore waters are not within these boundaries. Accordingly you are not entitled to a zone tax offset.