Private ruling: Farm management deposit
Published: June 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: A1: Yes.

Relevant facts and circumstances: You are a primary producer and have carried on a primary production business for several years. During the financial year ended 30June 2008 you contributed an amount into a FMD which was fully deducted from your assessable income in that year. The FMD was repaid and you calculated a loss excluding the FMD repaid. You meet the income requirement of Division 35 of the ITAA 1997.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 393-15(2) of Schedule 2G Income Tax Assessment Act 1997 subsection 35-10(2)

Reasons for decision: Summary: The assessable income that arises from the operation of Division 393 of the ITAA 1997 is considered assessable income 'from' the business activity when: (a) applying the loss deferral rule in Division 35, in subsection 35-10(2) of the ITAA 1997; and/or (b) determining whether the assessable income test in section 35-30 of the ITAA 1997 has been satisfied. Under Division 35 of the ITAA 1997, a loss made by an individual from a business activity will not be deductible in the financial year in which it arises unless certain conditions are met. Losses that cannot be taken into account in a particular year of income, because of subsection 35-10(2) of the ITAA 1997, can be applied to the extent of future profits from the business activity. Your business activity produced more than $20,000 in assessable income satisfying the assessable income test of section 35-30 of the ITAA 1997. As a result, the loss deferral rule in section 35-10 of the ITAA 1997 will not apply to your business losses and the previously deferred losses can be offset against the remaining profit.

Subject: Farm management deposit: Is the repaid farm management deposit (FMD) able to be offset against non-commercial business losses from prior years?