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Edited version of your written advice
Authorisation Number: 1012957115889
Date of advice: 3 February 2016
Ruling
Subject: Non-commercial losses
Question:
Does the repayment of funds from a farm management deposits (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 2015
The scheme commenced on
01 July 2014
Relevant facts
You are a partner in a partnership which conducts a primary production business.
In the relevant financial year, you withdrew more than $250,000 from your FMD.
All eligibility rules for FMDs have been satisfied.
In the relevant financial year, your taxable income from other sources was less than $10,000 and your net investment losses were less than $100. You had no reportable fringe benefits or reportable superannuation contributions in the same period.
As a result of the FMD withdrawal, your taxable income was over $250,000 in the relevant financial year.
The primary production activity passed the real property test.
Relevant legislative provisions
Income Tax Assessment Act 1997 - Division 393
Income Tax Assessment Act 1997 - Subsection 35-10(2E)
Reasons for decision
The assessable income that arises from the operation of Division 393 of the ITAA 1997 (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; and/or
(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 your primary production business activity and your income from unrelated sources is less than $250,000. Therefore, you satisfy the income requirement under section 35-10 (2E).
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