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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of private ruling

Authorisation Number: 1011726348004

Ruling

Subject: farm management deposits

Question

Do the funds from a deceased taxpayer's farm management deposit account form part of their assessable income in their final income tax return?

Answer: Yes.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts and circumstances

The taxpayer passed away during the 2009-10 financial year.

The taxpayer was a primary producer and held funds in a farm management deposit account.

Upon the taxpayer's passing, the farm management deposit was not cashed out. Instead the bank transferred it into the name of the taxpayer's spouse.

Assumption

The funds in the farm management deposit account were claimed as deductions in the year(s) they were deposited.

Relevant legislative provisions

Income Tax Assessment Act 1936 Schedule 2G Section 363-1
Income Tax Assessment Act 1936 Schedule 2G Subsection 363-15(4)
Income Tax Assessment Act 1997 Section 6-10
Income Tax Assessment Act 1997 Section 10-5

Reasons for decision

Summary

The funds in the farm management account, for which a deduction has been claimed in previous years, form part of the deceased taxpayer's assessable income in their final tax return. This is the case even though the funds were not physically withdrawn from the account.

Detailed reasoning

Section 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997) includes in the assessable income of a resident taxpayer amounts that are not ordinary income but are made assessable by a provision of the taxation legislation.

Section 10-5 of the ITAA 1997 lists those provisions. Included in this list is Division 393 of Schedule 2G to the Income Tax Assessment Act 1936 (ITAA 1936) which deals with farm management deposits (FMD).

The FMD scheme allows primary producers to claim deductions for FMD made in the year they make a deposit. If a FMD is withdrawn, the amount of the deduction previously allowed is included in assessable income in the year of repayment.

Section 393-15 of Schedule 2G to ITAA 1936 discusses when a repayment of deposit is assessable. Subsection 393-15(4) deems a repayment of deposit has occurred on the date the owner passes away even though actual repayment may not occur until a later date.

The taxpayer passed away during the 2009-10 financial year and the bank transferred their FMD account into the name of their spouse.

Whilst the deposited funds were not physically removed from the FMD account, subsection 353-15(4) deems the deposits to have been paid to the taxpayer on the date of their death.

Therefore, the amount of the FMD funds which were previously claimed as deductions forms part of the taxpayer's assessable income in their final tax return.

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