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Edited version of private ruling
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Ruling
Subject: Non-commercial losses - income requirement test
Question
Does the repayment of funds from a farm management deposit (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 2010
The scheme commenced on
1 July 2009
Relevant facts
You have conducted a primary production business that has generally been profitable.
Your primary production business made a loss in the 200X-XX year of income.
Over a number of income years, you deposited amounts into FMDs.
All eligibility rules for FMDs have been satisfied.
In the 200X-XX financial year, you withdrew in excess of $3XX,000 from FMDs.
The funds repaid were used for running expenses and to purchase equipment for the primary production activities.
Your other income is approximately $X0,000, consisting of interest, dividend and capital gains income.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 393-15(2) of Schedule 2G
Income Tax Assessment Act 1997 Subsection 35-10(2E)
Reasons for decision
The assessable income that arises from the operation of section 393-15, Schedule 2G of the Income Tax Assessment Act 1936 (repayment of FMD) is considered assessable income "from" the business activity when:
(c) applying the loss deferral rule in Division 35, in subsection 35-10(2) of the ITAA 1997; and/or
(d) 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 the business activity and your income from unrelated sources is less than $250,000. Therefore, you satisfy the income requirement under section 35-10 (2E).