Private ruling: Restart primary production averaging
Date of advice: 8 July 2016
Published: August 2016
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you entitled to choose to recommence your primary production averaging with 20XX being the first year for averaging purposes? | A1: Yes

Relevant facts and circumstances: The arrangement that is the subject of the private ruling is described below. You are a primary producer who has been averaging your primary production income for more than five years. In the 20XX income tax year you had a large unfranked dividend paid to you following the restructure of family entities after the death of your parent. The dividend was a once off consequence of a company wind up and has caused your assessable income to become significantly inflated. Due to this unusual circumstance your relevant year's basic taxable income has been permanently reduced to less than two thirds of your average income in both of these years.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 392-95

Reasons for decision: Summary: You are treated as if you had not carried on business before. Division 392 ITAA97 allows people who are primary producers for two or more years in a row to even out your income tax liability from year to year by reducing the effect that fluctuations in your taxable income have on the marginal rates of tax that apply to you from year to year. Section 392-95 ITAA97 allows you to choose that this Division not affect your income tax liability for an income year if you can show that because of retirement or from any other cause your basic taxable income for the reduction year is permanently reduced during that year to less than two thirds of your average taxable income for that year. As required you have made your choice in writing to the Commissioner and the Commissioner has allowed your choice to reinstate 20XX as the first year for primary production averaging. As you have made this choice under s392-95 ITAA97 it applies to assessments for later income years as though you had never carried on a primary production business prior to 20XX.