Tax Laws Amendment (2009 Measures No. 2) Act 2009 (42 of 2009)
Schedule 1 Tax treatment of payments under financial claims scheme
Income Tax Assessment Act 1936
15 At the end of Division 393 in Schedule 2G
Add:
Subdivision 393-D - Special rules relating to financial claims scheme for account-holders with insolvent ADIs
Guide to Subdivision 393-D
393-75 What this Subdivision is about
A deposit (the new deposit ) arising from:
(a) an entitlement under Division 2AA of Part II of the Banking Act 1959 relating to a farm management deposit with an ADI; or
(b) a distribution from liquidation of the ADI that is attributable to a farm management deposit;
is treated as a transfer of the farm management deposit that does not give rise to new assessable income or deductions.
Table of sections
Operative provisions
393-80 Farm management deposits arising from farm management deposits with ADIs subject to financial claims scheme
393-85 Repayment if owner of farm management deposit with insolvent ADI is bankrupt, dies or ceases to be a primary producer
Operative provisions
393-80 Farm management deposits arising from farm management deposits with ADIs subject to financial claims scheme
Application
(1) This section applies if an entitlement arises under Division 2AA (Financial claims scheme for account-holders with insolvent ADIs) of Part II of the Banking Act 1959 in connection with an account containing a farm management deposit (the old farm management deposit ) with an ADI (the old ADI ) and either:
(a) an amount (the new deposit ) is deposited into one of the following to meet, in whole or part, so much of the entitlement as relates to the old farm management deposit:
(i) an existing account for a farm management deposit;
(ii) an account established under section 16AH of that Act for the purposes of meeting (wholly or partly) the entitlement; or
(b) an amount (also the new deposit ) is deposited by a liquidator of the old ADI into one of the following as so much of a distribution from the liquidation of the old ADI as relates to the old farm management deposit:
(i) an existing account for a farm management deposit;
(ii) an account established under section 16AR of that Act for the payment of the distribution.
Note: If an amount is deposited in connection with an account with the old ADI containing 2 or more old farm management deposits, the amount is to be apportioned between each old farm management deposit, so that so much of the amount as is attributable to a particular old farm management deposit is regarded as a distinct new deposit relating to that old farm management deposit.
New deposit is a farm management deposit
(2) This Division (except this section) applies to the new deposit as if it were a transfer of the old farm management deposit in accordance with a requirement of the agreement for the old farm management deposit as mentioned in subsection 393-40(5). To avoid doubt, this Division applies in that way as if the amount transferred were the amount of the new deposit, even if that is more or less than the amount of the old farm management deposit.
Note 1: The effects of this include the following:
(a) the applicable depositing day for the old farm management deposit is maintained under paragraph 393-37(7)(c) or (d) for the new deposit (which affects whether a withdrawal of the new deposit prevents it from being a farm management deposit);
(b) the new deposit is not regarded as a repayment of the old farm management deposit that is assessable income (see subsection 393-50(5));
(c) the making of the new deposit does not give rise to a deduction (see subsection 393-50(5)).
Note 2: Also, the unrecouped FMD deduction in respect of the new deposit is the same as the unrecouped FMD deduction in respect of the old farm management deposit (see subsection 393-50(5)), unless subsection (6) or (7) of this section applies because the new deposit is less than the old farm management deposit.
(3) Subsection 393-35(5) does not apply in relation to either of the following to prevent it from being a farm management deposit:
(a) the new deposit;
(b) a deposit made later directly by the transfer of the new deposit in accordance with a requirement of the agreement for the new deposit as mentioned in subsection 393-40(5).
Note: This means that the new deposit, or a deposit made as a direct result of the transfer of the new deposit, can be a farm management deposit (despite subsection 393-45(1)) even if it is less than $1,000.
(4) For the purposes of subsection 393-35(7), disregard the old farm management deposit in determining whether a deposit made after the entitlement arises is a farm management deposit.
Note: This means that a deposit made with a financial institution other than the old ADI after the entitlement arises can be a farm management deposit (despite subsection 393-45(1)) even though the owner of the deposit still has the old farm management deposit with the old ADI.
(5) Subsection 393-35(7) does not apply to the new deposit to prevent it from being a farm management deposit.
Note: This ensures that the new deposit can be a farm management deposit (despite subsection 393-45(1)) even though the owner of the new deposit has other farm management deposits with other financial institutions when the new deposit is made.
Unrecouped FMD deduction for new deposit less than old farm management deposit
(6) Despite subsection (2) and paragraph 393-50(5)(c), if the new deposit is less than the old farm management deposit at the time (the declaration time ) the old ADI became a declared ADI under the Banking Act 1959, the unrecouped FMD deduction in respect of the new deposit is the amount worked out using the formula:
Unrecouped FMD deduction in respect of old farm management deposit just before declaration time x (New deposit / Old farm management deposit just before declaration time)
Note: The new deposit could be less than the old farm management deposit if the entitlement is paid in instalments (each of which will be a separate new deposit).
(7) However, if the amount worked out under subsection (6) is more than the difference (if any) between:
(a) the unrecouped FMD deduction in respect of the old farm management deposit just before the declaration time; and
(b) the total of the amounts worked out under all previous applications of subsection (6) in relation to that old farm management deposit;
the unrecouped FMD deduction in respect of the new deposit is equal to the difference (if any).
Note: This ensures that when new deposits linked to the old farm management deposit are repaid, the total amount included in assessable income will not exceed the unrecouped FMD deduction in respect of the old farm management deposit.
Relationship with other provisions
(8) This section has effect despite Division 253 of the Income Tax Assessment Act 1997 (which is about tax treatment of entitlements under the financial claims scheme for insolvent ADIs).
393-85 Repayment if owner of farm management deposit with insolvent ADI dies, is bankrupt or ceases to be a primary producer
(1) This section applies if:
(a) you are the owner of a farm management deposit with an ADI that becomes repayable during a year of income in accordance with a requirement of the agreement concerned to the effect mentioned in subsection 393-40(3) (which covers death, bankruptcy and ceasing to be a primary producer); and
(b) during the year of income the ADI becomes a declared ADI under Division 2AA (Financial claims scheme for account-holders with insolvent ADIs) of Part II of the Banking Act 1959; and
(c) at the end of the year of income, you have either or both of the following:
(i) an unmet entitlement under that Division connected with the account for the farm management deposit;
(ii) an unmet claim against the ADI, or an unpaid debt owed to you by the ADI, in the winding up of the ADI that is a claim or debt that is connected with the account for the farm management deposit.
(2) Subsection 393-15(4) does not apply in relation to so much of the farm management deposit as is equal to the sum of the amounts described in subparagraphs (1)(c)(i) and (ii).