Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-45 - RULES FOR PARTICULAR INDUSTRIES AND OCCUPATIONS  

Division 393 - Farm management deposits  

Subdivision 393-A - Tax consequences of farm management deposits  

SECTION 393-10   Assessability on repayment of deposit  

Amount assessable

393-10(1)    
Your assessable income for an income year includes the amount worked out using the following formula, if:

(a) you are the *owner of a *farm management deposit; and

(b) the deposit is repaid in full or in part in the year; and

(c) the amount worked out using the formula is greater than nil:

* Unrecouped FMD deduction in respect of the deposit just before the repayment		Amount (if any) of the deposit that remains just after the repayment
	−

Note 1:

This subsection does not apply if the deposit is reinvested, the term of the deposit is extended, or the deposit is transferred at the depositor ' s request: see sections 393-15 and 393-16 .

Note 2:

In a case where not all of the deposit is deductible under section 393-5 , repayment of the non-deductible amount can take place without the amount being assessable. Once that amount is repaid, the remainder is assessable when it is repaid, so that the deduction is recouped.

Example:

Matt makes a farm management deposit of $120,000 on 1 April 2011. His taxable primary production income for the 2010-11 income year is $50,000; therefore, the deposit is only partly deductible in the year because it exceeds his taxable primary production income. Matt makes the following withdrawals from the deposit: $45,000 on 1 May 2013, $40,000 on 1 March 2014 and $35,000 on 1 September 2015.

The unrecouped FMD deduction immediately before the first repayment of $45,000 is $50,000. No amount is included in his assessable income for the 2012-2013 income year because the difference between the unrecouped FMD deduction ($50,000) and the amount of the deposit remaining after the repayment ($75,000) is less than nil.

The unrecouped FMD deduction immediately before the second repayment of $40,000 is $50,000. $15,000 is included in Matt ' s assessable income for the 2013-2014 income year because the difference between the unrecouped FMD deduction ($50,000) and the amount of the deposit remaining after the second repayment ($35,000) is $15,000, which is greater than nil.

The unrecouped FMD deduction immediately before the third repayment of $35,000 is $35,000; that is, $50,000 less $15,000. $35,000 is included in Matt ' s assessable income for the 2015-2016 income year; that is, the difference between the unrecouped FMD deduction ($35,000) and the amount of the deposit remaining after the third repayment ($0).

Unrecouped FMD deduction

393-10(2)    
The unrecouped FMD deduction in respect of a *farm management deposit at a particular time is:

(a) if no part of the deposit has been repaid before that time - the amount of the deduction under section 393-5 for making the deposit; or

(b) if one or more parts of the deposit have been repaid before that time - the unrecouped FMD deduction in respect of the deposit just before the most recent such repayment, reduced by any amount included in the *owner ' s assessable income under this section as a result of that repayment.

Example:

Mia makes a deposit of $3,000, all of which is deductible. The deposit ' s unrecouped FMD deduction just before a first repayment of $1,000 is the amount of the deduction (that is, $3,000 - see paragraph (2)(a)). The deposit ' s unrecouped FMD deduction just before a second repayment is $2,000 (that is, according to paragraph (2)(b), the unrecouped FMD deduction immediately before the first repayment ($3,000) reduced by the $1,000 included in Mia ' s assessable income as a result of the first repayment).

Note 1:

If the deposit was originally an income equalisation deposit, see section 393-10 of the Income Tax (Transitional Provisions) Act 1997 .

Note 1A:

Subsection 393-16(3) affects the unrecouped FMD deduction of a consolidated farm management deposit.

Note 2:

Section 393-55 affects the unrecouped FMD deduction of a new deposit linked to an old deposit affected by Division 2AA (Financial claims scheme for account-holders with insolvent ADIs) of Part II of the Banking Act 1959 .

Application of Division to transfer, reinvestment or other dealing

393-10(3)    
This Division applies to a transfer, reinvestment or other dealing with a *farm management deposit as if it were a repayment of the deposit, if:

(a) you are the depositor; and

(b) the transfer, reinvestment or other dealing is on your behalf or at your request.

Note:

Section 393-15 modifies the application of the deduction, assessment and 12 month rules to certain transfers, reinvestments and other dealings.

Deemed repayment because of death, bankruptcy etc.

393-10(4)    
This section applies as if a *farm management deposit had been repaid when it became repayable, rather than when it is actually repaid, if the deposit became repayable because of the requirement contained in the relevant agreement as set out in item 11 of the table in section 393-35 (death, bankruptcy etc.).

Note 1:

This means that the amount of the deposit is included in your assessable income for the income year when the death, bankruptcy etc occurs, rather than for any later year in which the deposit might be repaid.

Note 2:

This also means that, under subsection 45-120(5) in Schedule 1 to the Taxation Administration Act 1953 (about Pay as you go (PAYG) instalments), the amount of the deposit is included in your instalment income for the period in which the death, bankruptcy etc. occurs.

However, under section 12-140 in that Schedule, an amount may also be required to be withheld from the actual payment if you do not quote your tax file number or ABN to the relevant FMD provider.

Note 3:

Section 393-60 of this Act may limit the operation of subsection (4) if the farm management deposit is with an ADI that becomes a declared ADI under Division 2AA (Financial claims scheme for account-holders with insolvent ADIs) of Part II of the Banking Act 1959 .