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  • Reinvesting

    If you reinvest your FMD, it is not considered as either assessable income or a deduction.

    Reinvestments of FMDs include:

    • the extension of the term of the FMD, including where the interest payable is varied
    • the immediate reinvestment of a term deposit FMD as an FMD with the same provider
    • a transfer of funds to a new FMD provider where the  
      • existing FMD provider receives the request in writing and is given any other relevant information or assistance from the depositor
      • new FMD provider agrees to accept the deposit as an FMD
      • transfer is made electronically.
       

    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    • does not counts towards his assessable income for the year since it was not withdrawn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.

    End of example

     

    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.

    End of example
      Last modified: 08 Nov 2019QC 27154