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Edited version of private advice
Authorisation Number: 1051616238740
Date of advice: 5 December 2019
Ruling
Subject: The recommencement of year one of primary production income averaging
Question
Are you entitled to choose to recommence your primary production averaging with 2019 being the first year for averaging purposes?
Answer
Yes
This ruling applies for the following period:
Year ended 30 June 2019
The scheme commences on:
1 July 2018
Relevant facts and circumstances
You are a primary producer who has been averaging your primary production income for more than five years.
Due to the restructure of the family farming business your share of the family land and crop is significantly less than your original share in the farming partnership.
Your 2019 basic taxable income has been permanently reduced to less than two thirds of your average income and will remain reduced going forward.
Relevant legislative provisions
Income Tax Assessment Act 1997 Division 392
Income Tax Assessment Act 1997 Section 392-95
Reasons for Decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
You are treated as if you had not carried on business before.
Division 392 of the Income Tax Assessment Act 1997 (ITAA 1997)allows people who are primary producers for two or more years in a row to even out your income tax liability from year to year by reducing the effect that fluctuations in your taxable income have on the marginal rates of tax that apply to you from year to year.
Section 392-95 of the ITAA 1997allows you to choose that this Division not affect your income tax liability for an income year if you can show that because of retirement or from any other cause your basic taxable income for the reduction year is permanently reduced during that year to less than two thirds of your average taxable income for that year.
As required you have made your choice in writing to the Commissioner and the Commissioner has allowed your choice to reinstate 2019 as the first year for primary production averaging. As you have made this choice under section 392-95 of the ITAA 1997it applies to assessments for later income years as though you had never carried on a primary production business prior to 2019.