Private ruling: Timing of income
Published: April 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Can you include the interest on a farm management deposit as income in the 20XX year of income? | A1: Yes. | Q2: Can you include your repayment of a farm management deposit as income in the 20XX year of income? | A2: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You and your spouse had a number of farm management deposits (FMD) with a maturity date in June 20XX (the maturity date). You and your spouse went into the bank branch on Thursday or Friday and arranged to withdraw/redeem some of your FMD's each effective on the maturity date. The remainder of the FMD's were to be redeposited. The bank processed your request on the next business day. Interest earned on the FMD's relating to the 20XX financial year was deposited into your bank account.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Section 393-10.

Reasons for decision: Detailed Reasoning - Interest: Under subsection 6-5(4) of the ITAA 1997 a taxpayer is taken to have received an amount of ordinary income when the amount is applied or dealt with in any way on the taxpayer's behalf or as the taxpayer directs. Interest income is considered to be ordinary income. Taxation Ruling TR 98/1 sets out the Commissioner's policy on the derivation of income. In your case, the interest that accrued on your farm management deposit should have been credited to your account on maturity date. You are considered to have derived the full amount of interest accrued on maturity date and it should be included as income in your 20XX income tax return. | Detailed Reasoning - Farm management deposit: Subsection 393-10(3) of the ITAA 1997 provides that the meaning of 'repay' includes a transfer, reinvestment or other dealing on your behalf or at your request. This is relevant for determining the timing of the assessable amount on repayment of a farm management deposit (FMD). As you were previously allowed a deduction in respect of the FMD that is now repaid, subsection 393-10(1) of the ITAA 1997 requires you to include an amount in your assessable income equal to the amount repaid. In your case, we accept that the deposit was dealt with on your behalf prior to the end of the financial year. Therefore, the amount withdrawn will be assessable in the 20XX financial year.