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Edited version of private advice
Authorisation Number: 1012648727608
Ruling
Subject: Farm management deposit
Is the repaid farm management deposit (FMD) able to be offset against non-commercial business losses from prior years?
Answer
Yes.
This ruling applies for the following period:
Year ended 30 June 2013
The scheme commenced on
1 July 2012
Relevant facts and circumstances
You are a primary producer and have carried on a primary production business for several years.
During the financial year ended 30June 2008 you contributed an amount into a FMD which was fully deducted from your assessable income in that year.
The FMD was repaid and you calculated a loss excluding the FMD repaid.
You meet the income requirement of Division 35 of the ITAA 1997.
Relevant legislative provisions
Income Tax Assessment Act 1936 subsection 393-15(2) of Schedule 2G
Income Tax Assessment Act 1997 subsection 35-10(2)
Reasons for decision
The assessable income that arises from the operation of Division 393 of the ITAA 1997 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; and/or
(b) determining whether the assessable income test in section 35-30 of the ITAA 1997 has been satisfied.
Under Division 35 of the ITAA 1997, a loss made by an individual from a business activity will not be deductible in the financial year in which it arises unless certain conditions are met. Losses that cannot be taken into account in a particular year of income, because of subsection 35-10(2) of the ITAA 1997, can be applied to the extent of future profits from the business activity.
Your business activity produced more than $20,000 in assessable income satisfying the assessable income test of section 35-30 of the ITAA 1997. As a result, the loss deferral rule in section 35-10 of the ITAA 1997 will not apply to your business losses and the previously deferred losses can be offset against the remaining profit.
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