Private ruling: Farm management deposit
Date of advice: 27 March 2018
Published: June 2018
Ruling period: Year ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Questions and answers | 1. Will the amount you withdraw from the Farm management deposit (FMD) in the 2018 income year be assessable? | 2. Yes | 3. Will the amount you roll over (reinvest) in another FMD account be non-assessable in the 2018 income year? | 4. Yes

Relevant facts and circumstances: You have made FMD in the 2017 income year. The FMD was fully deductable in the 2017 income year. Your non-primary production income was less than $100,000.00 in the 2017 income year. You will roll over (reinvest) a lesser amount in FMD in the 2018 income year. Your non-primary production income will be greater than $100,000.00 in the 2018 income year.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 393-5 | Income tax Assessment Act 1997 section 393-15

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: In your case, the assessable amount is calculated as the amount of the deduction in the 2016-17 income year less the reinvested amount. Therefore, the amount not-reinvested (withdrawn) from your farm management deposit is assessable in the 2017-18 income year. Section 393-15 of the ITAA 1997 looks at Transactions to which the deduction, assessment and 12 month rules have modified application The provisions mentioned in section 393-5 do not apply in relation to the following transactions: (a) The immediate reinvestment of a *farm management deposit as a farm management deposit with the same *FMD provider; (b) the extension of the term of a farm management deposit (even if other terms such as those relating to interest payable are also varied); (c) The transfer of a farm management deposit in accordance with a requirement of the relevant agreement as set out in item 13 of the table in section 393-35 (which allows for transfers of deposits at the request of the depositor). This means that these transactions: (a) Will not result in assessable income for the owner; and (b) Will not give rise to a deduction; and (c) Will not, if the transaction occurs within 12 months after the end of the day the deposit is made, result in the deposit losing its status as a farm management deposit. In your case the reinvested amount will not be assessable to you and you will not be able to claim a deduction for the amount rolled over.