Edited version of private advice

Authorisation Number: 1051926486158

Date of advice: 24 November 2021

Ruling

Subject: Farm management deposit

Question 1

Are you required to include the repayment amount from your Farm Management Deposit (FMD) as assessable income in the 20xx-xx income year?

Answer

No.

Question 2

Are you required to include the repayment amount from your FMD as assessable income in the 20xx-xx income year?

Answer

Yes.

Division 393 of the Income Tax Assessment Act 1997 contain the provisions regarding farm management deposits.

Farm management deposits allow you to carry over income from years of good cash flow and to draw down on that income in years when you need the cash. This enables you to defer the income tax on your taxable primary production income from the income year in which you make the deposit until the income year in which the deposit is repaid.

In your case, the amount is not required to be included in your 20xx-xx assessable income as the repayment was an error made by an FMD provider. The FMD provider did not implement your instructions to extend the repayment beyond the 20xx-xx income year to a date a few days later in xxxx. The repayment of your FMD is required to be included as assessable income in the 20xx-xx income year.

This ruling applies for the following periods:

Year ending 30 June 20xx

Year ended 30 June 20xx

The scheme commences on:

1 July 20xx

Relevant facts

You are a primary producer who made a Farm Management Deposit (FMD) on xxxx.

On its 12 month maturity, the bank, the FMD provider, asked whether the deposit was to be reinvested. The default terms of the reinvestment were to invest for a further 12 months, however, your intention was to rollover the account for a short period to xxxx and then withdraw the funds. This decision was made after a meeting with your tax agent on xxxx.

You completed the deposit maturity notice advising that you would close the account in xxxx.

At xxxx on xxxx, you received notification via your banking app of receiving $xxxx being the closure of the FMD. You immediately tried contacting the bank to advise that this was an error and the account should be closed in xxxx, however as it was out of banking hours, you were unsuccessful in your attempts to speak to the bank before the end of the income year.

You contacted the bank the next day to see if the error could be rectified. The bank advised that there wasn't any changes that could be made to the account and the FMD would be recorded as being closed on xxxx.

Declaring this amount in the xxxx income year will have significant undue tax consequences.

You have not been declared bankrupt.

Relevant legislative provisions

Income Tax Assessment Act 1997 Division 393