Private ruling: Farm management deposits and the income requirement calculation
Date of advice: 24 August 2022
Published: November 2022
Ruling period: Year ended 30 June 2021
Date scheme commenced: 1 July 2005

Ruling: A1: Yes. The assessable farm management deposit income that arises from the operation of Division 393 of the Income Tax Assessment Act 1997 (ITAA 1997) is considered assessable income "from" the business activity when applying the loss deferral rule in Division 35 of the ITAA 1997,and is therefore excluded from the income requirement calculation. For more information on non-commercial losses, please visit our website at ato.gov.au and search for quick code QC 33774.

Relevant facts and circumstances: You conduct a primary production business activity. You service farm machinery and provide assets and materials to related entities. In the relevant financial year you withdrew money from the farm management deposits relating to the activity, to cover your business expenses. After excluding the farm management deposit income, your adjusted taxable income for the purpose of the income requirement calculation at section 35-10(2E) of the ITAA 1997 is less than $250,000. You estimated that you would generate a profit for the next financial year as all farm management deposits except for XXXX have been exhausted.

Relevant legislative provisions: • Income Tax Assessment Act 1997 subsection 35-10(2E) | • Income Tax Assessment Act 1997 subsection 35-30 | • Income Tax Assessment Act 1997 Division 393


Question One: Are farm management deposits relating to your business loss activity, excluded from the income requirement calculation under section 35-10(2E) of the Income Tax Assessment Act 1997 ?