Zone tax offset - less than 183 days in current income year but more than 183 days in prior income year.

Is the taxpayer, who is a resident of an isolated area (zone area), entitled to a zone tax offset under section 79A of the Income Tax Assessment Act 1936 (ITAA 1936) where they spend less than half of the current income year in the zone area and have spent more than half of the immediate prior income year in that zone area?

No, the taxpayer is not entitled to the zone tax offset under section 79A of the ITAA 1936, where they spend less than half of the current income year in the zone area and have spent more than half of the immediate prior income year in that zone area.

In the current income year, the taxpayer was present in a zone area for less than half of the year of income.

In the immediate prior income year, the taxpayer was present in that zone area for more than half of that income year.

The taxpayer was not in the zone prior to the immediate preceding year of income.

For a taxpayer to be entitled to a zone tax offset under subsection 79A(1) of the ITAA 1936, the taxpayer must satisfy one of the residence requirements contained in subsection 79A(3B) of the ITAA 1936.

Subsection 79A(3B) of the ITAA 1936 provides that a taxpayer is treated as a resident of a particular area, being the prescribed area, Zone A, Zone B, the special area in Zone A or the special area in Zone B in a year of income if: • They resided in a zone for at least half of the year of income; • They were actually in a zone for at least half of the year of income; • They died during the year of income and resided in a zone at the date of death; • They were in a zone for less than half of each of the current and immediately preceding income years and the total for the two years exceeds 182 days; or • They resided in a zone for less than half of the current income year and for less than half of an earlier income year, being any of the four preceding income years other than the immediately preceding income year and provided that the number of days for the two years exceeds 182 days and that they resided continuously for those periods in that zone.

The days in excess of 183 from the immediately preceding income year cannot be used when calculating any entitlement for the current income year. The total number of days for each year can only be combined when a taxpayer stays less than 183 days in the zone area in both of those years.

As the taxpayer stayed in the zone area for less than 183 days in the year of income and more than 182 days in the immediate preceding year of income, the taxpayer does not satisfy the residency requirements of section 79(3B) of the ITAA 1936. The taxpayer is therefore not entitled to a zone tax offset under subsection 79A(1) of the ITAA 1936.