Zone Tax Offset

The zone tax offset is a tax rebate for taxpayers in remote areas, or in the case of defence or U.N. personnel, who have had a tour of duty within a designated overseas location.

Broadly, the offset is calculated as follows:

  • The amount of the offset is is made up of a fixed amount, which varies according to geographic location
  • plus a further amount which is a percentage of an amount based on the taxpayer’s dependents (if any).
    • only specific dependents are included in the base amount formula, and there are income tests (limits) around both the taxpayer’s and dependents income

The zone rebate or offset falls into two main categories, each with similar requirements and claims structure:

  • the zone tax offset which is for residents of specific areas within or near Australia for more than 183 days; and
  • the overseas defence forces tax offset which is for ADF or U.N. forces in overseas localities for more than 183 days.

See calculating zone tax offset for 2017-18 2016-17  2015-16  2014-15

If eligible for both zone and overseas forces offsets, only one can be claimed, but you can claim the one with the higher calculated value.

Zone Locations – Remote Localities- Overseas Forces Localities

FIFO Workers
[Update 1 July 2015]

Announced in the 2015 Budget  and now enacted – from 1 July 2015 “fly-in fly-out” and “drive-in drive-out” workers are excluded from claiming the zone rebate where their normal residence is not within the specified tax zone. Until 30 June 2015 it was sufficient for a taxpayer to reside or work in a specified zone for more than 183 days of an income year.

Zone Tax Offset Calculations

Offset claims are made up of a fixed amount, plus a percentage of dependants offset base amount values.

  • Zone A offset value is $338 + 50%
  • Zone B offset value is $57 + 20%
  • Special zone areas offset value is $1,173 + 50%
  • Overseas forces offset value is $338 + 50%

*  Individual dependent offset calculations are each subject to (and reducible by) tested income levels, including the the excess of Adjusted Taxable Income over $282 divided by 4, and in general, a part-year apportionment applies when dependency is less than a full year.

Dependent Offset Maximum* Base Amounts

Offset type2017-182016-172015-162014-15
Dependent (Invalid and Carers)$2,666$2,627$2,588$2,535
Sole parent$1,607$1,607$1,607$1,607
Each full-time student under age 25$376$376$376$376
One non-student under age 21$376$376$376$376
Each other non-student under age 21$282$282$282$282

Dependent (Invalid and Carers) offset eligibility is subject to the claimant’s adjusted income being below the indexed Family Tax Benefit (Part B) ATI threshold which is $100,000. (Up to 30 June 2015 this limit was $150,000).

Change to Adjusted Taxable Income Formula

The government has adjusted the formula for the inclusion of the value of fringe benefits in Adjusted Taxable Income.

The meaning of ‘adjusted fringe benefits total’ is modified so that the gross value rather than adjusted net value (previously 51%) of reportable fringe benefits is used, except for PBIs, hospitals and charities.

‘adjusted fringe benefits total’ is a component of Adjusted Taxable Income

This affects eligibility for:

  • family tax benefits, stillborn baby payment,child care benefit, Youth Allowance, Abstudy and Isolated Children’s Allowance
  • parental leave pay and dad and partner pay
  • low income superannuation contribution payment
  • net medical expenses offset
  • dependant (invalid and carer) (DICTO) tax offset
  • Notional dependent’s offset for the Zone & overseas personnel tax offsets

For details of the amending legislation see Budget Savings (Omnibus) Act 2016 (Schedule 15). The measures received royal assent on 16 September 2016 and according to its terms therefore take effect from 1 January 2017 for family assistance payments and for income tax tests from 1 July 2017

Calculated offset amounts are reduced by the amount of a remote area allowance received from Centrelink or the Department of Veterans’ Affairs, or an equivalent amount included in an exceptional circumstances relief payment.

Zone Tax Offset 2013-14ZoneTax Offsets 2013-14 - Source ato.gov.au

Dependent Offsets – For Zone Allowance Purposes 2013-14

Offset typeOffset ValueAdjusted Taxable Income
Upper Limit *
Dependant (Invalid and Carers)$2,471$10,166
Spouse with no dependent child$2,471$10,166
Spouse with dependent child$2,871$11,766
Sole parent$1,607
Each full-time student under age 25$376$1,785
One non-student under age 21$376$1,785
Each other non-student under age 21$282$1,409

* Dependent offsets are reduced by the the excess of Adjusted Taxable Income over $282 divided by 4.

Australia – Zone Tax Offset 2012-13

Zone-allowance-tax-offsets-2013
Zone Offsets 2012-13 Source: ato.gov.au

Offset Amounts

Offset claims are made up of a fixed amount, plus a percentage of dependants offset values.

  • Zone A offset value is $338 + 50%
  • Zone B offset value is $57 + 20%
  • Special zone areas offset value is $1,173 + 50%

The added percentages are based on calculated actual and notional offset components for dependents as set out in the table below.

 

Dependent Offsets – For Zone Allowance Purposes 2012-13

Offset typeMax. Offset ValueAdjusted Taxable Income
Upper Limit *
Dependant (Invalid and Carers)$2,423$9,973
Spouse with no dependent child$2,423$9,973
Spouse with dependent child$2,815$10,548
Sole parent$1,607
Each full-time student under age 25$376$1,785
One non-student under age 21$376$1,785
Each other non-student under age 21$282$1,409

* Dependent offsets are reduced by the the excess of Adjusted Taxable Income over $282 divided by 4.

In Australia zones are categorised as:

  • Zone A;
  • Zone B; or
  • the special remote areas – places more than 250kms from the centre of an urban area with a population of more than 2499 according to the 1981 census.

The eligible zones do not include offshore oil or gas rigs.

A summary listing of Zone Areas is here.

A longer list of Zone locations is here.

Meeting the 183 days requirement

Eligibility for the zone tax rebate is essentially based on living in one or more of specified locations for more than half a year (183 days).  From 1 July 2015 “fly-in fly-out” and “drive-in drive-out” workers are excluded from claiming the zone rebate where their normal residence is not within the specified tax zone.

Whether you reside in a zoned area includes the normal meaning of “reside”, however days of mere physical presence within the zone can also be counted, along with days of absence in some instances.

There is some discretion available to the Commissioner of Taxation to determine what is “reasonable” in the circumstances, on matters of eligibility. Tax Ruling 94/27 has quite a bit of detail on this, and some examples.

The 183 days within a zone requirement doesn’t have to be all within the same financial year. The 183 days rule is flexed or extended in a number of ways:

  • the accumulated number of days can include fractions of a day
  • it is not necessary that earned income be connected with the zone in question
  • as noted above, the eligible days includes the time of physical presence within the area
  • a person who was in a zone at the time of death is treated as being fully eligible for that year
  • if less than 183 days is accumulated in a year, the days can be counted as part of the total for eligibility in the following year
  • from after 1 July 1999, in a continuous period of less than 5 years, a first year total of days which is less than 183 days can be counted with the last year period to achieve a total of more than 183 days

More than one zone

The three zones within Australia have differing offset values, so it is important to know how the rules apply when more than one zone is applicable.

  • if more than 183 days is spent in total within zones each less than 183 days, then the eligible days are simply apportioned across each zone category
  • if more than 183 days are achieved under any of the rules in more than one zone, you are entitled to claim the highest value zone offset

Zone Tax Offset Calculator

To check the numbers, use the ATO’s Zone or overseas forces tax offsets calculator for specified years. The calculator manages both zone and overseas forces claim options.

Overseas Defence Forces Tax Offset

The ADF/UN overseas forces offset is for specified overseas locations.

The full value of the offset is $338 + 50% of calculated dependents offset amounts, worked out in the same way as above.

A full claim is available with at least 183 days within the specified locality.  A partial claim for a lesser number days is based on the number of eligible days as a ratio of 183.

Any days for which a tax exemption is available are not counted.  A death during the year gives rise to a full value claim for that financial year, regardless of the actual number of eligible days accumulated.

Note that in general, where overseas service salary and allowances are made tax exempt, the zone tax offset is not available.

See further:

Entering Zone Offset claim in the myTax app

Once you are logged in to MyTax app, from the 3rd screen, “Personalise Return”  – scroll down to Offsets and tick the box for “Zone or overseas forces”.

When you click Next, a data entry option for the zone offset will show up under the Offsets category. A link is provided there to the Zone Offset calculator on the ATO’s site in order to calculate the amount to claim.

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This page was last modified 2017-12-02