Example 9: Reinvestment 12 months after initial deposit

In the 2017 income year, Neale deposits $280,000 into his FMD account (a term deposit account).

Neale's taxable primary production income for the year exceeded $280,000 and his taxable non-primary production income was less than $100,000. Therefore, his deposit was fully deductible.

In the 2018 income year, more than 12 months after the initial deposit, Neale rolls over (reinvests) $200,000 of his FMD and withdraws $80,000. The rollover amount ($200,000):

• does not count towards his assessable income for the year since it was not withdrawn
• can't be counted as a deduction since it was claimed when it was first deposited.

The $80,000 amount Neale withdrew from the FMD ($80,000) is assessable in the 2018 year.

Example 10: Reinvestment within 12 months of initial deposit

Karen deposits $50,000 into her FMD account in June 2017. Her deposit was fully deductible. In September 2017, Karen transfers the $50,000 to a new FMD provider on a 12-month term.

The transfer is a reinvestment.

The withdrawal will not count as assessable income as it was reinvested. Karen can still claim the deduction of $50,000 in her 2017 income tax return.