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Edited version of your written advice
Authorisation Number: 1012856428867
Date of advice: 10 August 2015
Ruling
Subject: Farm management deposits
Question
Are the funds from the taxpayer's farm management deposit accounts excluded from the calculation of their assessable income in the year ended 30 June 2015?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2015.
The scheme commences on
1 July 2014.
Relevant facts and circumstances
The taxpayer passed away during the relevant financial year.
The taxpayer held funds in farm management deposit accounts.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-10
Income Tax Assessment Act 1997 Section 10-5
Income Tax Assessment Act 1997 Division 393
Income Tax Assessment Act 1997 Subsection 393-10(4)
Reasons for decision
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 the ITAA 1997 which deals with farm management deposits (FMD).
The FMD scheme allows farmers to claim deductions for FMD made in the year they make a deposit. If they withdraw a FMD, the amount of the deduction previously allowed is included in their assessable income in the year of repayment.
Section 393-10 of ITAA 1997 discusses when a repayment of deposit is assessable. Subsection 393-10(4) deems a repayment of a 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 relevant financial year. Whilst the deposited funds may not have been physically removed from the FMD account, subsection 393-10(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 for the year ended 30 June 20.
The legislation does not provide the Commissioner with the discretion to treat the amount of the FMD funds as having been received in an income year other than the one in which the taxpayer passed away.
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