| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1051355221190
Date of advice: 27 March 2018
Ruling
Subject: Farm management deposit
Questions and answers
1. Will the amount you withdraw from the Farm management deposit (FMD) in the 2018 income year be assessable?
2. Yes
3. Will the amount you roll over (reinvest) in another FMD account be non-assessable in the 2018 income year?
4. Yes
This ruling applies for the following periods:
Year ending 30 June 2018
The scheme commenced on:
1 July 2017
Relevant facts and circumstances
You have made FMD in the 2017 income year.
The FMD was fully deductable in the 2017 income year.
Your non-primary production income was less than $100,000.00 in the 2017 income year.
You will roll over (reinvest) a lesser amount in FMD in the 2018 income year.
Your non-primary production income will be greater than $100,000.00 in the 2018 income year.
Relevant legislative provisions:
Income Tax Assessment Act 1997 section 393-5
Income tax Assessment Act 1997 section 393-15
Reasons for decision
Farm Management Deposit Scheme
Subsection 393-5 of the ITAA 1997 states:
(1) You can deduct the amount of a farm management deposit for an income year if
(a) You are the owner of the deposit: and
(b) The deposit is made at a time during the year when you are an individual carrying on a primary production business in Australia; and
(c) if during the year, at a time after the deposit was made, you stopped carrying on a primary production business in Australia--you started carrying on such a business again within 120 days (whether or not during the year); and
(d) Your * taxable non-primary production income for the year is not more than $100,000; and
(e) You do not die or become bankrupt during the year.
Section 393-10 of the ITAA 1997 considers the assessability on repayment of a deposit.
Amount assessable
(1) Your assessable income for an income year includes the amount worked out using the following formula, if:
(a) You are the owner of a farm management deposit; and
(b) The deposit is repaid in full or in part in the year; and
(c) The amount worked out using the formula is greater than nil:
In your case, the assessable amount is calculated as the amount of the deduction in the 2016-17 income year less the reinvested amount. Therefore, the amount not-reinvested (withdrawn) from your farm management deposit is assessable in the 2017-18 income year.
Section 393-15 of the ITAA 1997 looks at Transactions to which the deduction, assessment and 12 month rules have modified application
The provisions mentioned in section 393-5 do not apply in relation to the following transactions:
(a) The immediate reinvestment of a *farm management deposit as a farm management deposit with the same *FMD provider;
(b) the extension of the term of a farm management deposit (even if other terms such as those relating to interest payable are also varied);
(c) The transfer of a farm management deposit in accordance with a requirement of the relevant agreement as set out in item 13 of the table in section 393-35 (which allows for transfers of deposits at the request of the depositor).
This means that these transactions:
(a) Will not result in assessable income for the owner; and
(b) Will not give rise to a deduction; and
(c) Will not, if the transaction occurs within 12 months after the end of the day the deposit is made, result in the deposit losing its status as a farm management deposit.
In your case the reinvested amount will not be assessable to you and you will not be able to claim a deduction for the amount rolled over.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
