Do you live in a remote area of Australia or serve in the overseas defence forces? You may be eligible for a tax offset that could save you money when you lodge your return.
If you’ve heard of the Zone Tax Offset (ZTO) in Australia but aren’t sure if you are eligible or not, we put together this simplified guide to help.
Quick Summary:
- Working or living in a remote area or serving in overseas forces may qualify you for the zone tax offset (ZTO) in Australia.
- The zone tax offset aims to assist residents with the higher cost of living and amenities that are often associated with living in isolated locations.
- If you qualify for the ZTO you can enjoy significant savings when you lodge your tax return.
- To qualify, you must reside in a Zoned Area for a minimum of 183 days
Eligibility for the Zone Tax Offset no longer covers workers who work but do not live in a Zoned Area.
What is the Zone Tax Offset?
The Zone Tax Offset (ZTO) refers to a tax concession offset for residents who live in remote or isolated areas of Australia, or for defence or U.N. personnel serving in a designated overseas location.
This tax rebate is intended to help residents afford the higher cost of living that is typically associated with remote areas.
If you qualify, you can enjoy significant savings when it comes time to lodge your tax return.
Who Can Claim the Zone Tax Offset?
If you reside in a remote area in Australia, you may qualify to claim the zone tax offset. The remote area must be defined as a Zoned Area (e.g. Zone A, Zone B, or Special Area) by the Australian government to be eligible.
Check the Australian Taxation Office’s current regulations to find out if you reside in a Zoned Area: The Australian Zone list.
To qualify for the zone tax offset, you must reside in the specified zoned area. If you work in the zoned area but do not actually live there, you will not qualify for the zone tax offset.
What is the Zone Tax Offset for Australian Defence Force Personnel or Overseas Defence Force?
You may be eligible for an overseas forces tax offset if:
- You are a member of the Australian Defence Force or a United Nations armed force
- You served in a specified overseas locality
- Your income relating to that service is not specifically tax-exempt
To be eligible to claim the full tax offset, your service in an overseas locality must exceed 183 days in the income year.
If you served fewer than 183 days during your overseas service, you may still be able to claim a portion of the tax offset.
To see a list of the current specified overseas localities and additional details, click here to see the ATO’s rules.
How To Be Eligible for the Zone Tax Offset
Here are the eligibility requirements for the Zone Tax Offset, taken directly from the Australian Taxation Office website. They base eligibility on the place of your usual residence.
To claim the Zone Tax Offset, the ATO requires your residence to meet both of these criteria:
- Must be a remote or isolated Zoned Area (as specified on the Australian zone list)
- Must be your residence for 183 days or more during the income year
How is the Zone Tax Offset Calculated?
Australia’s Zone Tax Offset is calculated based on a fixed amount according to your Zoned Area and a percentage of an amount based on your dependents.
You can use the Australian Taxation Office’s calculator tool to get a rough estimate of your zone tax offset.
If you want a more specific estimate on your Zone Tax Offset, contact our qualified tax specialists. We can get you an accurate estimate so you know exactly what to expect come tax time.
How Much Can I Claim?
Here are the values of zone tax offset for a single person for a year depending on the zone:
- Zone A: $338
- Zone B: $57
- Special zone areas: $1,173
- Overseas or defence forces: $338
If you have dependents, the amount you can claim will vary. Offset claims consist of a fixed amount combined with a percentage of dependent offset base amount values.
FAQs
Can you be eligible in a zone for less than the 183-day threshold?
In almost all cases, the ATO requires you to live in a Zoned Area for a minimum of 183 days to be eligible to claim the Zone Tax Offset.
However, the Australian Taxation Office states you may still be eligible for the zone tax offset if you lived in a Zoned Area for less than 183 three days if you meet all of their following requirements:
- Your usual place of residence was in a zone for a continuous period of less than 5 years, and
- You were unable to claim in the first year because it was not your residence for 183 days or more
- The total of the days you lived there in the first year and the current income year is 183 days or more
- The period you lived in a zone in the current income year includes the first day of the income year
Can FIFO workers claim the ZoneTax Offset?
Eligibility for the Zone Tax Offset no longer covers workers who work in a Zoned Area. New requirements state that individuals must reside in a Zoned Area, not just work there.
For example, let’s say a remote worker named Amanda flies in to work as a nurse in a Zoned Area. She works for two weeks at a time in the Zoned Area before flying home to her primary residence in New Zealand for several weeks. She works on and off throughout the income year in the Zoned Area but doesn’t actually reside there. She stays in accommodations provided by her employer when working in the Zoned Area. Amanda does not qualify for the Zone Tax Offset.
As a remote worker, you may qualify for a zone tax offset if you meet the following criteria:
- Must reside in an area designated by the ATO as a Zoned Area (e.g. Zone A, Zone B, or Special Zone)
- Must have lived in the specified eligible zone for a minimum of 183 days
You May Also Like: A Complete Guide to Tax Deductions for FIFO Workers
What if I qualify for both the overseas defence forces tax offset and the zone tax offset?
If you are eligible for both the zone and overseas forces tax offsets, the ATO states you can only claim one. We recommend claiming the one with the higher calculated value.
Do offshore oil or gas rigs qualify for the zone tax offset?
No, the zone tax offset does not include offshore oil or gas rigs.
Have More Questions on the Zone Tax Offset?
Our tax specialists are here to help you maximise your tax refund. If you have questions on the Zone Tax Offset or want to find out what other tax deductions you may qualify for, we invite you to reach out to our team.
We are dedicated to getting you the most money on your tax return and taking the confusion and stress out of the process of lodging your tax return. Contact us by emailing our team at support@taxreturn.com.au or phoning us on 0499 829 829.
