This question is for primary producers only.
Did you make farm management deposits (FMD) or have repayments during 2021–22?
No |
Go to question 18 Capital gains 2022, or return to main menu Individual tax return instructions 2022 |
|---|---|
Yes |
Read on. |
Definitions
- An FMD provider is an institution that accepts farm management deposits.
- An FMD owner is a person who makes an eligible farm management deposit.
If you received a distribution of income as a beneficiary of a trust that carried on a business of primary production, you are considered to be carrying on a business of primary production and therefore eligible for the farm management deposit tax concessions.
If you are the beneficiary of a primary production trust that made a loss, you are considered to be in a business of primary production, and therefore eligible for the farm management deposit tax concessions, if:
- the trustee of the primary production trust nominated you as a chosen beneficiary, or
- you are the beneficiary of a fixed trust.
You need to know
FMD owners can access their deposits early when affected by certain natural disasters or drought, without losing their concessional tax treatment (see Natural disaster assistance and 'early repayment' and Drought and 'early repayment').
For further information see Farm management deposits scheme
Deposits
Deductible deposits
Your 2021–22 farm management deposits are deductible if you satisfy all of the following:
- your 2021–22 taxable non-primary production income is $100,000 or less
- you were carrying on a primary production business at the time of making the deposit
- if you stopped carrying on a primary production business during the year, you recommenced carrying on such a business within 120 days
- your individual deposits were not less than $1,000 and total deposits not more than $800,000
- your individual deposits did not cause your total FMDs to exceed the $800,000 account limit
- your individual deposits did not exceed the amount of your 2021–22 taxable primary production income
- you held the deposits for at least 12 months or qualify for the early repayment exceptions.
Non-deductible deposits
You cannot claim a deduction for deposits made in 2021–22 if during the year the FMD owner:
- became bankrupt or ceased to carry on a primary production business (including a business that was carried on by a partnership or by a trust) for 120 days or more, or
- died.
If this applies to you or you are the executor of a deceased estate:
- all deposits must be repaid
- include as assessable income any repaid deposits that were previously deducted
- do not claim a deduction for deposits
- made after the business ceased, or
- made in 2021–22 by the now deceased FMD owner.
Deposits repaid within 12 months
You cannot claim a deduction for that part of a deposit repaid within 12 months.
If you withdrew a deposit early (and don't qualify for either of the early repayment exceptions) and made the deposit in this income year, do not include this amount as a deposit or repayment. If, however, you claimed the deduction in a prior income year, request an amendment of your assessment for that income year.
If you withdrew part of your deposit early, you may continue to claim a deduction for that part of the deposit that was held for a full 12 months or more (provided that your total deposits remain $1,000 or more).
Natural disaster assistance and 'early repayment'
You can access your deposits early, without losing your concessional tax treatment, if you are eligible to claim the natural disaster assistance exception. That is, if:
- you made the original deposit before a natural disaster declaration was made
- your primary production business received Natural Disaster Relief and Recovery Arrangements (NDRRA) Category C assistance, and
- you withdrew the FMD deposit early, after you received the NDRRA Category C assistance.
To confirm that your business is eligible, or has received this type of assistance, review your disaster assistance documents. For more information about this natural disaster exception, see Farm management depositsExternal Link.
If you claim the exception, you cannot claim a deduction for deposits you made in 2021–22 after the early repayment.
Drought and 'early repayment'
You can access your deposits early, without losing your concessional tax treatment, if you are eligible to claim the drought exception. You are able to claim this exemption if:
- for six consecutive months an area of your primary production property has been affected by rainfall that is within the lowest 5% of recorded rainfall for that area of your property
- publicly available rainfall records held by the Bureau of Meteorology confirm this low rainfall for the period of six consecutive months preceding the month in which the repayment is made, and
- for that six month period
- you held the deposit
- you are not involved solely in primary production industries like fishing, pearling, tree felling or tree transporting.
You can determine if your primary production property meets the rainfall requirements at a particular time by using the FMD rainfall analyserExternal Link on the Department of Agriculture, Fisheries and Forestry website.
To obtain your concessional tax treatment you need to ensure that any repayment of your deposit occurs before the end of the month immediately following that six month drought period.
If you claim the exception, you cannot claim a deduction for deposits you made in 2021–22 after the early repayment.
Repayments are assessable income
You must include repayments of previously deducted deposits as assessable income in the income year they are repaid.
Do not include as assessable income repayments of deposits that you did not claim as a deduction.
When you receive a repayment, you are considered to have been repaid any non-deductible amounts first.
Reinvesting, extending, or transferring deposits
You do not need to include as assessable income:
- reinvested deposits, or extensions of the term of deposits with the same provider
- merged deposits provided certain conditions are met
- transfers of the same deposit amount from one FMD provider to another; examples of this include
- electronic transfers from a liquidated authorised deposit-taking institution (ADI) to a new ADI
- transfers by the Australian Prudential Regulatory Authority under the Financial Claims Scheme.
Deceased estate
If you are looking after the estate of someone who died in 2021–22, you cannot claim a deduction for any deposits they made in 2021–22. Any farm management deposits held at the time of death are assessable income in 2021–22 to the extent they were previously claimed as a deduction.
Deductions in earlier years are not affected even when the person dies within 12 months of making the deposit.
For further information see Farm management deposits scheme or Contact us.
Answering this question
What you may need
- Your account statement from your FMD provider.
- Information for primary producers 2022
- Farm management deposits scheme
Step 1
Add up deductible deposits you made in 2021–22.
Write the total at D item 17 on your tax return.
Step 2
Add up early repayments you withdrew during 2021–22 that qualify for the natural disaster or drought exception. Write the total at N.
If you made the deposit in 2021–22, ensure you have included this deposit at D item 17 above.
If you withdrew in 2021–22 a deposit you made in 2020–21 for which you claimed the deduction, you do not need to lodge an amendment to your 2020–21 tax return.
Step 3
Add up the FMDs that you held for 12 months or more and that were repaid during 2021–22. Write the total at R.
Step 4
Add up the amounts you showed at N and R, and take away the amount you showed at D.
Write the answer at E. If the amount is negative (your deductible deposits exceed your total repayments), print L in the Loss box at E.
Small business income tax offset
If any part of the amount you show at E relates to a business you carry on as a sole trader and you are a small business entity, you may be entitled to the small business income tax offset. Refer to the instructions at P8 Small business income tax offset, Business income and expenses in the Business and professional items 2022.
If any part of the amount you show at N or R relates to a partnership or trust that is a small business entity, you may be entitled to the small business income tax offset. Refer to the instructions at 13 Partnerships and trusts 2022.
We use these amounts to work out your entitlement to the small business income tax offset.
Record keeping
You will need to keep the following documents:
- statement of account from your FMD provider
- proof that you received Natural Disaster Relief and Recovery Arrangements (NDRRA) Category C assistance for primary producers.
Where to go next
- Go to question 18 Capital gains 2022
- Return to main menu Individual tax return instructions 2022
- Go back to question 16 Deferred non-commercial business losses 2022