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

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: 

Relevant facts and circumstances: You and your spouse conduct a primary production business under a partnership structure. During the 20XX financial year, you and your spouse deposited over $250,000 each into an eligible farm management deposit (FMD) account using funds from your primary production business. In the 20YY financial year, the partnership made a loss and you and your spouse each withdrew over $250,000 from your respective FMDs which was used in the primary production business as working capital. All eligibility rules for FMDs have been satisfied. As a result of the FMD withdrawal, your taxable income was over $250,000 in the 20YY financial year.

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 (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).