Zone tax offset and overseas forces tax offset

Zone and overseas forces, If you live in a remote area or serve in forces overseas, you may be eligible for one of the following tax offsets:

• Zone tax offset
• Overseas forces tax offset.

If you qualify for both of the above tax offsets, you will be allowed to claim the one that provides the greater offset.

Zone tax offset

A rebate of tax, known as the zone tax offset, is available to individuals who are residents of specified remote or isolated area of Australia (known as a zone). This doesn't include an offshore oil or gas rig.

Eligibility for the zone tax offset changed on 1 July 2015. Eligibility is based on your usual place of residence. If your usual place of residence was not in a zone, you are not eligible for the zone offset.

Remote areas are classed as either Zone A or Zone B. There are also special areas within these zones. If you don't know which zone your area is in, see the Australian zone list.

Eligibility from 1 July 2015

From 1 July 2015, you can claim the zone tax offset if your usual place of residence was in a remote or isolated area (known as a zone) for 183 days or more during the income year.

If your usual place of residence was in a zone for less than 183 days in the income year, you may still be able to claim the tax offset. This is as long as your usual place of residence was in a zone for a continuous period of less than five years and:

• you were unable to claim in the first year because you lived there less than 183 days
• the total of the days you lived there in the first year and the current income year is 183 or more, and the period you lived in a zone in the current income year includes the first day of the income year.

Any discretion exercised by the Commissioner of Taxation for the zone tax offset will be made with reference to your usual place of residence.

Example 1 – unable to claim the zone tax offset – no residence in a prescribed zone

Levi is an engineer who lives in Adelaide. He flies to Alice Springs for 12-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).

Levi doesn't have his usual place of residence within a prescribed zone, even though he is in Alice Springs for 183 days or more. This means he is unable to claim the zone tax offset.

Example 2 – able to claim the zone tax offset

Jonte is an engineer who lives in Darwin (located in Zone A). He travels to Kununurra in Western Australia (located in a Zone A special area), where he is employed in the mining industry. In his usual shift, Jonte drives to Kununurra, works 14 days at the mine and drives back to Darwin where he remains for 16 days.

Jonte is eligible for the Zone A tax offset because his usual place of residence is in Darwin (Zone A).

Example 3 – unable to claim the zone tax offset – main residence outside Australia

Angela is a doctor who works in the Darwin Hospital emergency department. She flies into Darwin from Auckland, New Zealand and works on a regular rotational basis in Darwin Hospital.

Usually, Angela works for 10 days and then has a break of between eight and ten days. During her breaks, Angela travels back to Auckland to see her friends and family. She stays in accommodation provided by the hospital when she is in Darwin.

Angela is purchasing a house in Auckland. She also has a car which she leaves at her Auckland home for use when she is there. Angela has bills sent to her Auckland home and she is registered to vote in New Zealand.

Angela isn't eligible for the zone tax offset because her usual place of residence is in Auckland.

Eligibility prior to 1 July 2015

Prior to 1 July 2015, to qualify for the zone tax offset, you must have lived or worked in a remote area (not necessarily continuously) for either:

• 183 days or more during the income year
• 183 days or more in total during the current and previous income years – but less than 183 days in the current year and less than 183 days in the previous income year – and you didn't claim a zone tax offset in your previous year's tax return.

Overseas forces tax offset

You may be eligible for an overseas forces tax offset if the following apply:

• you serve in a specified overseas locality
• your income relating to that service is not specifically exempt from tax
• you are a member of either
  • the Australian Defence Force
  • a United Nations armed force.

Periods of service for which your income was exempt foreign employment income are excluded in working out your eligibility for the tax offset.

To claim the full tax offset, you must have served in an overseas locality for 183 days or more in the income year. If your overseas service was less than 183 days, you may be able to claim part of the tax offset. Unlike the zone tax offset, you can't carry forward any unused days from previous years to make up 183 days.

Hunter Partners are Accountants, Tax Agents and Financial Planners. We can assist you with all aspect of your accounting, tax and financial planning requirements, call Hunter Partners on (07) 4723-1223.