Private ruling: Non-commercial losses - farm management deposits
Published: April 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Does the repayment of funds from a farm management deposits (FMD) cause you to fail the income requirement under section 35-10(2E) of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 - Division 393 | Income Tax Assessment Act 1997 - Subsection 35-10(2E)

Reasons for decision: Summary: The assessable income that arises from the operation of Division 393 of the ITAA 1997 (repayment of FMD) 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. The income repaid from the FMD is considered to be income from your primary production business activity and your income from unrelated sources is less than $250,000. Therefore, you satisfy the income requirement under section 35-10 (2E).

Relevant facts: You and your spouse have operated an agricultural business activity under a partnership structure since the 200X financial year. | You and your spouse have made farm management deposits (FMD) over a number of years out of the profits generated from the business activity. | During the relevant financial year, both you and your spouse withdrew over $250,000 each from your FMDs to fund the purchase of additional farming land. | Your primary production partnership activity produced a loss of less than $250,000 in the relevant financial year. | You estimate that your activity will produce a tax profit in the subsequent financial year. | The income received from your farming operations is your main source of income.