Taxation Ruling
IT 2470
Income tax: double revolvements received from the Wool Market Support Fund
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FOI status:
May be releasedFOI number: I 1019813PREAMBLE
Woolgrowers, through the wool tax system, make annual contributions to the Wool Market Support Fund. This Fund was set up to buy and sell wool in order to maintain stable wool prices. Operating under a reserve price system, a floor price is set for wool at auction below which the Australian Wool Corporation will step in to purchase wool stocks. Alternatively, where prices rise excessively beyond the reserve price, the Corporation sells at a price intended to dampen the rise. These transactions are financed from the Wool Market Support Fund.
2. A feature of the Wool Market Support Fund is that when it is considered that there is enough money in the Fund to finance the purchase of a substantial proportion of the national wool clip a refund or revolvement is made to those who contributed to the Fund.
3. During the 1986/1987 financial year the Minister for Primary Industry was able to declare a double revolvement from the Wool Market Support Fund of contributions the Fund received in the 1978/79 and 1979/80 financial years.
4. This Office was asked to agree to allowing woolgrowers the option of having the double revolvement spread over two income years instead of returning the full amount as assessable income in the year of receipt. It was suggested that section 26BA of the Income Tax Assessment Act be applied to cover the circumstances of the double revolvement, treating it the same as a double wool clip. That section enables woolgrowers to elect to have profits from a second wool clip to be carried forward to the next succeeding year of income where those profits arose from a second shearing brought about by fire, drought or flood.
RULING
5. There is no provision in the income tax law that would allow the revolvements of contributions made in 1978/79 and 1979/80 from the Wool Market Support Fund to be spread over two income years. The revolvements represent assessable income in the year of receipt. Section 26BA of the Income Tax Assessment Act would not apply as the revolvements are not proceeds from the sale of wool that was prematurely shorn because of fire, drought or flood.
COMMISSIONER OF TAXATION
7 April 1988