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Edited version of private ruling
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Ruling
Subject: Non commercial losses
Question
Does the repayment of funds from a farm management deposit (FMD) cause you to fail the income requirement under section 35-10(2E) of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
You are a partner in a partnership which conducts a primary production business.
Over a number of income years, you each deposited amounts into two FMDs.
All eligibility rules for FMDs have been satisfied.
In the 2009-10 year of income, you withdrew all of the funds from a FMD.
The partnership made a loss in the 2009-10 year of income, even if the FMD repayment is taken into account.
The funds repaid were used for running expenses for the primary production activities.
Your income from other sources was less than $20,000.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 393-15(2) of Schedule 2G
Income Tax Assessment Act 1997 Subsection 35-10(2E)
Reasons for decision
The assessable income that arises from the operation of section 393-15, Schedule 2G of the Income Tax Assessment Act 1936 (repayment of FMD) is considered assessable income "from" the business activity when:
(a) applying the loss deferral rule in Division 35, in subsection 35-10(2) of the ITAA 1997
(b) determining whether the assessable income test in section 35-30 of the ITAA 1997 has been satisfied.
The income repaid from the FMD is considered to be income from the business activity and your income from unrelated sources is less than $250,000. Therefore, you satisfy the income requirement under section 35-10 (2E) of the ITAA 1997.
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