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Abnormal receipts

Last updated 3 March 2016

Grants and subsidies

Generally, amounts received by way of grants or subsidies will be assessable either as ordinary income or statutory income.

Clean up and restoration grants to small business and primary producers in relation to the 2009 Victorian bushfires administered by the Rural Finance Corporation of Victoria are exempt from tax.

For more information on grants and subsidies, see Taxation Ruling TR 2006/3 – Income tax: government payments to industry to assist entities (including individuals) to continue, commence or cease business.

Profit from forced disposal or death of livestock

You can elect to grants or subsidies forced disposal or death of livestock over a period of five years. Alternatively, you can elect to defer the profit and use it to reduce the cost of replacement livestock in the disposal year or any of the next five income years. Any unused part of the profit is included in assessable income in the fifth income year.

An election to spread or defer profits can be made where you dispose of the stock, or they die, because:

  • land is compulsorily acquired or resumed under an Act
  • a state or territory leases land for a cattle tick eradication campaign
  • pasture or fodder is destroyed by fire, drought or flood and you will use the proceeds of the disposal or death mainly to buy replacement stock or maintain breeding stock for the purpose of replacing the livestock
  • they are compulsorily destroyed under an Australian law for the control of a disease (including bovine tuberculosis) or they die of such a disease, or
  • you receive official notification under an Australian law dealing with contamination of property.

Insurance recoveries

Where you have an assessable insurance recovery for loss of livestock or loss by fire of trees that were assets of a primary production business carried on in Australia, you can elect to include the amount in assessable income in equal instalments over five years.

Double wool clips

Tax relief is available in relation to the proceeds of the sale of two wool clips arising in an income year because of an early shearing caused by drought, fire or flood.

A wool grower can elect to defer the profit on the sale of the clip from the advanced shearing to the next year.

Tax averaging

Tax averaging enables you to even out your income and tax payable over a maximum of five years to allow for fluctuations. This ensures that you do not pay more tax over a number of years than taxpayers on comparable but steady incomes. When your average income is less than your taxable income (excluding capital gains) you receive an averaging tax offset.

When your average income is more than your taxable income (excluding any capital gains) you must pay extra income tax. This is included in the tax assessed.

The amount of the averaging tax offset or extra income tax is calculated automatically and your notice of assessment will show you the averaging details. If you are unsure of this calculation, phone 13 28 66.

If you wish, you may choose to withdraw permanently from the averaging system and pay tax at ordinary rates. However, once you have made this choice, it will affect all your assessments for subsequent years and cannot be revoked. This means you will be taxed on the same basis as taxpayers not eligible for averaging provisions.

Farm management deposits scheme

The farm management deposits (FMD) scheme is designed to enable primary producers to deal with uneven income flows by making deposits during prosperous years and receiving repayments during less prosperous years.

Subject to certain conditions, deposits are deductible in the year in which they are made. If any deposits that you have previously claimed as a tax deduction are repaid, the repayments are treated as assessable income in the year in which they are made. Amounts that are repaid within 12 months of deposit do not receive concessional treatment unless the repayment is due to an exceptional circumstance or natural disaster (see below).

The basic rules of the scheme are:

  • The deposit must be made with an FMD provider.
  • The owner of the deposit must be a primary producer when the deposit is made.
  • The deposit must be made on behalf of only one person. (Deposits by two or more persons jointly or made on behalf of two or more persons are not recognised as FMDs.)
  • Deposits must be made by 30 June to qualify for a deduction in that income year.
  • The minimum deposit or repayment is $1,000; the total of all deposits held at any one time cannot exceed $400,000.
  • Interest on FMD is assessable in the income year in which it is paid.
  • The tax deduction allowed for FMD in any income year is limited to the taxable income derived from a business of primary production in that year.

You can hold FMDs with more than one FMD provider. You will need to account for all of your deposits when completing your income tax return and ensure that you do not exceed the maximum $400,000 deposit cap (for all deposits).

  • You cannot claim a deduction for FMD if in the income year  
    • your taxable non-primary production income for the financial year exceeds $65,000
    • you become bankrupt during the year, or
    • before the end of the year you cease to carry on a primary production business for 120 days or more.
     
  • Where a deposit holder dies in the income year, a deduction is not allowable for any deposits they made in that income year.
  • FMDs do not have to be 12-month fixed term deposits but can be held in deposits of any term, provided no part of the amount is repaid within 12 months of the date of deposit.
  • You can repay part of a deposit within 12 months of making the deposit without losing the benefit of the tax deduction for the remaining amount. This residual amount still qualifies for an FMD deduction, provided it remains in the account for at least 12 months and does not fall below $1,000. A deduction is not allowable for the part of the deposit that is repaid. Where this affects a deduction you claimed in the prior year, you need to request an amendment of your assessment for that income year.

FMDs and exceptional circumstances

You can repay a deposit early and still retain the tax deduction in the income year in which the deposit was made, if at the time of the repayment:

  • you operate your primary production business in an area covered by an exceptional circumstances (EC) declaration made by the Minister for Agriculture, Fisheries and Forestry, and
  • the deposit was made when the area was not under an EC declaration.

To confirm your EC status, you may obtain an EC certificate from the relevant state authority up to three months after the end of the income year in which the repayment was made. This is to ensure that primary producers can take advantage of the EC concession before the certificate is issued. The amount of the repayment is assessable in the income year in which the repayment is made, and you cannot claim a deduction for any subsequent deposits made in the same income year.

To find out if your area has been declared to be in exceptional circumstances:

If you need an exceptional circumstances certificate, phone the Australian Government Drought and Farmer Assistance Hotline.

FMDs and natural disasters

You can access your FMDs early without losing their taxation benefit if, on or after 1 July 2010, you:

  • received Natural Disaster Relief and Recovery Arrangements (NDRRA) primary producer Category C assistance, within 12 months of making the deposit, and
  • withdrew the FMD deposit after having received the recovery assistance.

If you access your FMD in the year after you claimed the deduction, you do not need to lodge an amendment but should include the repayment as assessable income in the current year.

You will need to retain proof that you received the relevant disaster assistance as part of your tax records.

For more information on early access to FMDs as a result of natural disaster (including eligibility requirements) visit the Department of Agriculture.

For 2012 and future years, new labels have been added to the tax return to show deductible deposits and repayments for exceptional circumstances, natural disasters and other repayments.

For more information about how to complete your tax return go to ato.gov.au and enter ‘Farm Management Deposits’ in the ‘Search for’ box at the top of the page.

Farm management deposit accounts are commercial products offered by financial institutions but coordinated by the Australian Government Department of Agriculture, Fisheries and Forestry. For more information on the taxation requirements for the FMD scheme, go to Farm management deposits scheme (NAT 8776).

Worksheet

To help you work out your income from primary production, we have provided a worksheet at the back of this publication. If you use it, keep the completed worksheet with your other records.

The publication Business and professional items 2013 (NAT 2543) explains where amounts from the worksheet, labelled PP1–PP11, should be shown at P8 on the form Business and professional items schedule for individuals 2013 (NAT 2816).

More information

Internet

For general tax information and up-to-date and comprehensive information about deductions, go to ato.gov.au

Publications

Publications referred to in this guide are:

The following publications have additional information for primary producers. If they are relevant to your circumstances, use them in conjunction with this guide.

To get any publication referred to in this guide:

  • go to ato.gov.au/publications for publications, taxation rulings, practice statements and forms
  • phone our Publications Distribution Service on 1300 720 092

Phone

We can offer a more personalised service if you provide your tax file number (TFN).

Individual

13 28 61

Individual income tax and general personal tax enquiries, including capital gains tax

Business

13 28 66

Information about business income tax, fringe benefits tax (FBT), fuel tax credits (FTC), goods and services tax (GST), pay as you go (PAYG) and activity statements, including lodgment and payment, accounts and business registration (including Australian business number and tax file number), and interest, dividend and royalty withholding tax

Superannuation

13 10 20

Other services

If you do not speak English well and need help from the ATO, phone the Translating and Interpreting Service (TIS) on 13 14 50.

If you are deaf or have a hearing or speech impairment,
phone the ATO through the National Relay Service (NRS) on the numbers listed below, and ask for the ATO number you need:

  • TTY users, phone 13 36 77. For ATO 1800 free call numbers, phone 1800 555 677.
  • Speak and Listen users, phone 1300 555 727. For ATO 1800 free call numbers, phone 1800 555 727.
  • Internet relay users, connect to the NRS at relayservice.com.auExternal Link

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