INCOME TAX ASSESSMENT REGULATIONS 1997

Schedule 1C  

(regulation 393-10 )

FARM MANAGEMENT DEPOSITS: STATEMENTS TO BE READ BY DEPOSITORS

Part 2 - Required statements  

2   Tax consequences of farm management deposits  
The scheme allows individuals carrying on a primary production business in Australia to deduct the amount of any farm management deposit they own from their assessable income for the income year in which the deposit is made. However, the amount of the deductions cannot exceed the owner ' s taxable primary production income for the income year.
Under the Pay As You Go system, owners may reduce their instalment income for an instalment period by the amount of farm management deposits made during that period. The reduction is limited to the amount that the owners can reasonably expect to deduct for the deposit for the income year in which the deposit is made. However, the instalment income for the period cannot be reduced below nil.
When a farm management deposit is repaid to an owner in an instalment period, the instalment income of the period will include the amount of the repayment. But the owner ' s instalment income will only include so much of the repayment as will be included in the owner ' s assessable income for the income year in which the repayment is made.
If neither the owner ' s tax file number nor Australian Business Number has been quoted to the FMD provider that holds the deposit, the amount repaid will also be subject to withholding at a rate equal to the sum of the top marginal tax rate and the Medicare levy.




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