Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello MP)Chapter 6 Farm management deposits
Outline of chapter
6.1 Schedule 6 to this Bill amends the Income Tax Assessment Act 1936 (ITAA 1936) to increase the non-primary production income threshold and to increase the total deposit limit for farm management deposits.
Context of amendments
6.2 Schedule 2G to the ITAA 1936 contains the provisions for farm management deposits. A farm management deposit is a tax-linked, financial risk management tool for primary producers that is designed to allow primary producers to set aside income from profitable years for subsequent 'draw-down' in low-income years. This reduces the risk to primary producers of income variability owing to factors such as drought.
6.3 An individual primary producer with taxable non-primary production income of $50,000 or less for the year of income is able to make a farm management deposit (paragraph 393-10(1)(b)). The total deposit limit is $300,000 (subsection 393-35(6)).
6.4 These thresholds have not been amended since the introduction of farm management deposits in 1999 and increasing these thresholds will assist primary producers to cope with the ongoing drought.
Summary of new law
6.5 Schedule 6 increases the non-primary production income threshold from $50,000 to $65,000 per income year and the total amount that a primary producer can hold in a farm management deposit from $300,000 to $400,000.
Comparison of key features of new law and current law
| New law | Current law |
| Taxable non-primary production income for the year of income is not more than $65,000. | Taxable non-primary production income for the year of income is not more than $50,000. |
| The deposit must not be more than $400,000, and the sum of the balances from time to time of the deposit and all other farm management deposits of the owner must not be more than $400,000. | The deposit must not be more than $300,000, and the sum of the balances from time to time of the deposit and all other farm management deposits of the owner must not be more than $300,000. |
Detailed explanation of new law
6.6 This Schedule will increase the non-primary production income threshold from $50,000 to $65,000 per income year. This will allow more primary producers to hold farm management deposits as well as allow current holders to earn a larger amount of non-primary production income each income year without becoming ineligible for the Scheme. [ Schedule 6, item 1, paragraph 393-10(1)(b )]
6.7 This measure will also increase the total amount that a primary producer can hold in a farm management deposit from $300,000 to $400,000 [ Schedule 6, item 3, subsection 393-35(6 )]. A consequential amendment is made to the heading of subsection 393-35(6) to reflect the threshold change [ Schedule 6, item 2, heading in subsection 393-35(6 )].
Application and transitional provisions
6.8 The amendments made by this Schedule apply to assessments for the year of income in which this Bill receives Royal Assent and later years of income. [ Schedule 6, item 4 ]