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Edited version of private advice
Authorisation Number: 1012681611849
Ruling
Subject: Farm Management Deposit
Question
Are you taken to have received a repayment of your Farm Management Deposit (FMD) where your FMD account is closed by the bank and transferred into another FMD account?
Answer
No.
This ruling applies for the following periods:
Year ended 30 June 2014.
The scheme commences on:
1 July 2013.
Relevant facts and circumstances
You had a FMD with a Bank. It was due to expire on a date. Before that date, you gave written instructions that the FMD was to be rolled over for a further period.
This roll-over was effected when the Bank closed the FMD account before placing the funds into a new FMD account. The closing and opening of the accounts occurred on the same day and you did not receive any funds as part of the transfer process.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 393-10
Income Tax Assessment Act 1997 Subsection 393-10(3)
Reasons for decision
Section 393-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that your assessable income includes (subject to certain conditions) repayments of FMDs.
Subsection 393-10(3) of the ITAA 1997 states that transfers, reinvestments or other dealings with a FMD are to be treated as repayments if (i) you are the depositor; and (ii) the transfer, reinvestment or other dealing is on your behalf or at your request.
In your case, the transfer from the FMD account to the new FMD account is not considered to constitute a repayment. You had authorised the bank to roll-over the deposit and this is what occurred. That is, the bank made an effective rollover of the FMD even though its method was unusual.
Consequently the movement of the monies between FMD accounts is not taken to be a repayment of your FMD deposit. Thus the amount involved does not form part of your assessable income for the income year.
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