Private ruling: Farm management deposit scheme repayment
Date of advice: 27 May 2021
Published: February 2022
Ruling period: Year ending 30 June 2021
Date scheme commenced: 1 July 2020

Ruling: Q1: Will the amount you withdraw from the Farm management deposit (FMD) in the 2021 income year be assessable? | A1: Yes

Relevant facts and circumstances: You sold your farming property in 2015 due to the affects of the drought and the fact that your severely autistic son was leaving school and it was necessary for you to be near the services required for his ongoing care. You deposited $400,000 into a Farm Management Deposit Scheme (FMD) with the understanding you could withdraw funds at a later time to purchase livestock. In 2015-16 income year you had an abnormally high income due to a complete herd disposal as opposed to the usual yearly cattle sale numbers. You have purchased another farming property and would like to access the funds from the FMD to purchase breeding cattle.

Relevant legislative provisions: Income Assessment Act 1997 Subsection 393-5 | Income Assessment Act 1997 Section 393-10

Reasons for decision: Detailed Reasoning - 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: | Summary: In your case, the assessable amount is calculated as the amount of the deduction in the 2015-16 income year. Therefore, the amount repaid (withdrawn) from your farm management deposit is assessable in the 2020-21 income year. There is not any discretion provided to the Commissioner within the provisions relating to farm management deposits to allow any exceptions to the rules within those provisions.