Zone Tax Offset Guide — FY2025-26

What Is the Zone Tax Offset?

The “Zone Tax Offset” (ZTO) is a non-refundable tax offset that reduces the income tax payable by Australian residents who live in remote or isolated areas for more than 183 days in a financial year. The ATO classifies eligible locations into Zone A, Zone B, and Special Areas, each carrying a different offset amount.

The offset recognises that residents of remote towns face higher costs for groceries, fuel, medical care, and education compared to residents of metropolitan centres like Sydney, Melbourne, and Brisbane. Approximately 2.4 million Australians live in areas that qualify for some level of zone tax offset. The ZTO has existed since the 1945 income tax assessment regime and remains one of the longest-running tax concessions in Australian taxation law.

Because the ZTO is non-refundable, it reduces your tax liability to a minimum of zero but does not generate a refund on its own. The offset applies after other tax offsets including the Low Income Tax Offset (LITO) have been calculated. Use our Income Tax Calculator to see how the zone tax offset interacts with your marginal tax rate for FY2025-26.

How Much Is the Zone Tax Offset?

The Zone Tax Offset ranges from $57 for Zone B residents to $1,511 for Special Area residents in Zone A for the 2025-26 financial year. The exact amount depends on your zone classification and whether you have dependants.

The base offset has two components: a fixed amount determined by your zone, and an additional amount for taxpayers in designated Special Areas. If you have a dependant spouse, invalid, or carer, you receive a supplementary dependant component on top of the base offset. The dependant component adds $130 for Zone A residents and $22 for Zone B residents, plus an additional 50% of relevant dependant rebates.

The base offset amounts have remained unchanged since FY2015-16. Unlike income tax brackets, the Zone Tax Offset is not indexed to inflation or wage growth. The offset applies to your total tax liability after the tax-free threshold of $18,200 and the standard Australian tax brackets have been calculated.

Who Is Eligible for the Zone Tax Offset?

Any Australian resident for tax purposes who maintains their usual place of residence in a designated zone for more than 183 days during the financial year is eligible for the Zone Tax Offset. The 183-day requirement does not need to be consecutive.

Eligibility is determined by where you live, not where you work. The following criteria must be met:

• Your usual place of residence (primary home) is located within a Zone A, Zone B, or Special Area postcode
• You lived in the zone for more than 183 days between 1 July and 30 June of the financial year
• You are an Australian resident for tax purposes during the relevant income year
• You have a tax liability greater than zero (the offset is non-refundable and cannot create a refund)

Temporary absences for holidays, work travel, or medical treatment do not break your residency in the zone, provided you maintain your home there and intend to return. Defence force personnel posted to remote areas qualify under separate overseas forces provisions. Non-residents for tax purposes are not eligible for the ZTO — see our Non-Resident Tax Guide for applicable tax rules.

How Do You Claim the Zone Tax Offset?

You claim the Zone Tax Offset at Item D7 in your individual income tax return (Zone or overseas forces tax offset). The claim requires your zone classification and the number of days you resided in the zone during the financial year.

Step-by-Step Claiming Process

1. Confirm your zone classification — Search your postcode on the ATO’s zone list or use the ATO’s online zone tax offset tool to verify whether your address falls in Zone A, Zone B, or a Special Area.
2. Count your residency days — Calculate the total number of days between 1 July and 30 June that you maintained your usual place of residence in the zone. The total must exceed 183 days.
3. Gather supporting evidence — Keep records including your lease agreement or mortgage documents, utility bills, electoral roll enrolment, and vehicle registration showing your zone address.
4. Complete Item D7 — In your tax return (paper or myTax), navigate to Item D7 and select the applicable zone. Enter the number of days and whether you are claiming for a dependant.
5. Lodge your return — Submit your tax return by the due date (31 October for self-lodgers, or by your tax agent’s extended deadline). The offset reduces your assessed tax payable.

Your employer does not apply the Zone Tax Offset through PAYG withholding during the year. The offset is claimed entirely at tax return time, which means you receive it as a lump-sum tax reduction or increased refund when you lodge. Check your expected refund using our Tax Refund Guide.

What Are the Zone Tax Offset Amounts by Zone?

The full Zone Tax Offset amount table below shows the base offset, Special Area supplement, and combined maximum for each zone classification in FY2025-26. These amounts apply identically to all eligible taxpayers regardless of income level.

The weekly benefit column shows the effective per-week tax saving when the offset is spread across 52 weeks. A Zone A Special Area resident effectively pays $29.06 less tax per week than an identical taxpayer living in a metropolitan area. The offset stacks with other tax offsets such as LITO and the Superannuation Co-contribution.

How Does the Zone Tax Offset Affect Take-Home Pay?

The Zone Tax Offset increases your after-tax income by reducing your total tax payable at assessment time. A Zone A Special Area resident earning $85,000 saves $1,511 in tax compared to an equivalent taxpayer in Sydney or Melbourne.

Worked Example: $85,000 Salary in Zone A Special Area

The ZTO delivers an extra $1,511 per year or $58 per fortnight in take-home pay for this taxpayer. At lower salaries, the offset represents a larger percentage of total tax. A worker earning $45,000 in Zone A Special Area pays $1,511 less tax on a base tax liability of $3,392 (before LITO), reducing their effective tax rate from 7.5% to 4.2%. Use our Take-Home Pay Calculator to model your specific salary and zone.

Can FIFO Workers Claim the Zone Tax Offset?

Fly-in-fly-out (FIFO) workers cannot claim the Zone Tax Offset unless their usual place of residence is in a designated zone. Working in a remote area on a roster arrangement does not qualify — the ATO requires you to live in the zone, not commute to it.

FIFO vs Resident Worker Eligibility

The ATO applies the “usual place of residence” test, not a day-counting test at the work site. Key indicators include where your family lives, where you are enrolled to vote, where your personal belongings are stored, and where you return after work rosters. FIFO workers based in capital cities like Perth, Brisbane, and Adelaide do not qualify regardless of how many days they spend at a remote site. These workers may still benefit from other deductions — check the Salary Sacrifice Guide for alternative tax-saving strategies.

Which Towns Are in Each Zone?

Zone boundaries are defined by postcodes and geographic coordinates set by the ATO. Zone A covers the most remote inland and northern areas, Zone B covers less remote but still isolated regions, and Special Areas designate the most geographically isolated communities within either zone.

Zone A Example Towns

Zone A includes towns with extreme remoteness across Western Australia, Northern Territory, Queensland, New South Wales, and South Australia. Key examples include:

• Western Australia: Karratha, Port Hedland, Newman, Tom Price, Exmouth
• Northern Territory: Alice Springs, Tennant Creek, Katherine
• Queensland: Mount Isa, Longreach, Cloncurry, Winton, Birdsville
• New South Wales: Broken Hill, Tibooburra, White Cliffs
• South Australia: Coober Pedy, Woomera, Roxby Downs, Leigh Creek

Zone B Example Towns

Zone B encompasses larger regional centres that are remote but maintain more infrastructure than Zone A locations:

• Northern Territory: Darwin, Palmerston, Humpty Doo
• Western Australia: Geraldton, Kalgoorlie, Broome, Carnarvon
• Queensland: Cairns, Townsville, Mackay, Rockhampton, Gladstone
• South Australia: Whyalla, Port Augusta, Port Lincoln, Ceduna

Special Area Examples

Special Areas are the most isolated communities in Australia, typically with populations under 1,000 and located hundreds of kilometres from the nearest service centre. Examples include remote Aboriginal communities, pastoral stations, and mining outposts across the Western Desert, Arnhem Land, and Cape York Peninsula. A Special Area resident in Zone A receives the combined offset of $1,511 ($338 + $1,173). Use the WA Pay Calculator or NT Pay Calculator to calculate take-home pay for salaries in these regions.

What Changed for the Zone Tax Offset in FY2025-26?

The Zone Tax Offset amounts remain unchanged for FY2025-26 at $338 (Zone A), $57 (Zone B), and $1,173 (Special Area supplement). No zone boundary reclassifications were announced in the 2025-26 Federal Budget.

The ZTO base amounts have not been adjusted since FY2015-16, despite significant inflation in remote area living costs over the past decade. The Productivity Commission and the Regional Australia Institute have both recommended indexation of the ZTO to the Consumer Price Index, but no legislative changes have been introduced.

The key change affecting remote area taxpayers in FY2025-26 is the updated income tax bracket structure introduced on 1 July 2024 under Stage 3 tax cuts. The 32.5% marginal rate was reduced to 30% for incomes between $45,001 and $135,000, and the 37% bracket was lowered to 37% for incomes between $135,001 and $190,000. These bracket changes deliver additional tax relief on top of the Zone Tax Offset. A Zone A worker earning $85,000 benefits from both the reduced 30% marginal rate and the $338 zone offset. See the full rate schedule on our Australian Tax Brackets page.

How Does the Zone Tax Offset Interact with Other Offsets?

The Zone Tax Offset stacks with other non-refundable tax offsets including the Low Income Tax Offset (LITO) and the Senior and Pensioner Tax Offset (SAPTO). The combined effect reduces your tax payable but cannot reduce it below zero.

The ATO applies offsets in a specific order. The tax-free threshold of $18,200 is applied first through the marginal rate calculation, then LITO (up to $700), then SAPTO (if eligible), and then the Zone Tax Offset. A low-income earner in Zone A Special Area earning $30,000 receives LITO of $700 plus ZTO of $1,511, reducing their income tax from $1,888 to zero. The excess offset amount is not refunded.

What Records Do You Need to Claim the Zone Tax Offset?

You must retain evidence proving your usual place of residence was in a designated zone for more than 183 days. The ATO does not require you to submit documents with your return, but you must produce them if audited.

Acceptable evidence includes:

• Property records — lease agreement, mortgage statement, or council rates notice showing the zone address
• Utility bills — electricity, water, gas, or internet bills addressed to the zone property
• Electoral enrolment — AEC enrolment confirmation showing the zone address
• Vehicle registration — registration papers listing the zone address
• School enrolment — children’s school records at a zone-area school
• Employment records — payslips or employment contract showing the zone address as your home address

Keep these records for 5 years from the date of lodgement. Understanding your payslip details helps verify your address records match — see our Understanding Your Payslip guide for what each field means.

Related Resources

Use these Australian tax calculators and guides alongside the Zone Tax Offset to calculate your complete take-home pay and tax position for the 2025-26 financial year.

• Take-Home Pay Calculator — Calculate your net pay after income tax, Medicare levy, superannuation, and HECS-HELP deductions
• Income Tax Calculator — Model your income tax liability across all Australian tax brackets for FY2025-26
• Low Income Tax Offset (LITO) Guide — Understand the $700 maximum LITO and how it phases out between $37,500 and $66,667
• Australian Tax Brackets — Full marginal rate table including the Stage 3 tax cut changes
• NT Pay Calculator — Take-home pay for Northern Territory workers, many of whom qualify for Zone A or Zone B offsets
• WA Pay Calculator — Take-home pay for Western Australian workers in Pilbara, Kimberley, and Goldfields zone areas

Frequently Asked Questions