Federal Register of Legislation - Australian Government

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SR 1998 No. 325 Regulations as amended, taking into account amendments up to SLI 2007 No. 19
Principal Regulations
Administered by: Treasury
Registered 22 Feb 2007
Start Date 17 Feb 2007
End Date 14 Dec 2011
Date of repeal 18 Oct 2016
Repealed by Treasury Laws Amendment (2016 Measures No. 3) Regulation 2016

Income Tax (Farm Management Deposits) Regulations 1998

Statutory Rules 1998 No. 325 as amended

made under the

This compilation was prepared on 17 February 2007
taking into account amendments up to SLI 2007 No. 19

Prepared by the Office of Legislative Drafting and Publishing
Attorney‑General’s Department, Canberra


Contents

                        1     Name of regulations [see Note 1]                                      3

                        2     Commencement [see Note 1]                                           3

                        3     Definitions                                                                       3

                        4     Application form for a farm management deposit: information given by depositor            4

                        5     Application form for a farm management deposit: information given to depositor            4

                        6     Information to be given to Department                                4

Schedule 1             Information to be provided by depositor                       6

Schedule 2             Statements to be read by depositors                             7

Part 1                      Statements                                                                     7

Part 2                      Required statements                                                        7

Part 3                      Additional information that is required                                9

Schedule 3             Information to be given to the Secretary by financial institution  11

Notes                                                                                                          12

 


  

  

1              Name of regulations [see Note 1]

                These regulations are the Income Tax (Farm Management Deposits) Regulations 1998.

2              Commencement [see Note 1]

                These regulations commence on the day the Taxation Laws Amendment (Farm Management Deposits) Act 1998 commences.

3              Definitions

                In these regulations:

Act means the Income Tax Assessment Act 1936.

quarter means a quarter starting on 1 January, 1 April, 1 July or 1 October in any year, including the quarter in which section 264AA of the Act commences.

 

The farm management deposit scheme

Schedule 2G to the Act makes arrangements for farm management deposits, which are deposits made with financial institutions in the circumstances described in the Schedule.

Subdivision 393‑B in the Schedule sets out the main circumstances.

The farm management deposits scheme is intended to allow certain primary producers to:

     (a)      make a deposit; and

     (b)      deduct the deposit from the depositor’s assessable income in the year of income when the deposit is made; and

     (c)      include the deduction in the depositor’s assessable income when the deposit is repaid in a later year of income.

 

4              Application form for a farm management deposit: information given by depositor

                For paragraph 393‑30 (3) (b) in Schedule 2G to the Act, the information to be provided by a depositor is set out in Schedule 1.

Note   Subsection 393‑30 (3) in Schedule 2G to the Act requires a depositor to apply to a financial institution to make a farm management deposit with the institution.

Under paragraph 393‑30 (3) (b), the application form must require the depositor to provide any information required by regulations.

Under paragraph 393‑30 (3) (a), the application form must also permit the depositor to state the owner’s tax file number in the form.

5              Application form for a farm management deposit: information given to depositor

                For paragraph 393‑30 (3) (c) in Schedule 2G to the Act, the form must contain:

         (a)   either of the statements set out in Part 1 of Schedule 2; and

         (b)   the statements set out in Part 2 of Schedule 2; and

         (c)   statements of the information required by Part 3 of Schedule 2.

Note   Subsection 393‑30 (3) in Schedule 2G to the Act requires a depositor to apply to a financial institution to make a farm management deposit with the institution.

Under paragraph 393‑30 (3) (c), the application form must include any statements, required by regulations, that are to be read by the depositor when completing the form.

6              Information to be given to Department

                For paragraph 264AA (2) (d) of the Act, the information that a financial institution must give to the Secretary to the Department of Agriculture, Fisheries and Forestry is set out in Schedule 3.

Note   Section 264AA of the Act requires a financial institution that holds a farm management deposit at the end of any month in a quarter to give information in writing to the Secretary to the Department of Agriculture, Fisheries and Forestry.

The information is described in subsection 264AA (2), and includes any other information, in relation to farm management deposits held by the institution, that is required by the regulations.

Under subsection 264AA (3) of the Act, the regulations must not require information that discloses the depositor’s identity or from which the depositor’s identity could be reasonably inferred.


Schedule 1        Information to be provided by depositor

(regulation 4)

  

1        Depositor’s name, address and telephone number.

2        Amount of deposit.

3        Description of major commodity or commodities produced in the year of deposit.

4        If the depositor is not the owner of the deposit — the owner’s name, address and date of birth.


 

Schedule 2        Statements to be read by depositors

(regulation 5)

Part 1          Statements

1        Authorised deposit‑taking institution

The institution issuing this application form is an authorised deposit‑taking institution for the purposes of the Banking Act 1959.

2        State or Territory guarantee

A State or Territory guarantee the repayment of any deposit taken by the institution issuing this application form in the course of the business of banking or in the course of a business that consists of or includes taking money on deposit.

Part 2          Required statements

1        Purpose of farm management deposit scheme

The farm management deposits scheme is designed to allow primary producers, with taxable non‑primary production income, to shift before‑tax income from years when they need it least to years when it is most needed. The scheme helps primary producers manage their exposure to adverse economic events and seasonal fluctuations.

Eligibility criteria apply to primary producers under the scheme.

Note   Primary producer is defined in section 393‑25 of Schedule 2G to the Act.

2        Tax consequences of farm management deposits

The scheme allows primary producers to deduct the amount of any farm management deposit they own from their assessable income for the income year in which the deposit is made. However, the amount of the deductions cannot exceed the owner’s taxable primary production income for the year.

Under the Pay As You Go system, owners may reduce their instalment income for an instalment period by the amount of farm management deposits made during that period. The reduction is limited to the amount that the owners can reasonably expect to deduct for the deposit for the income year in which the deposit is made. However, the instalment income for the period cannot be reduced below nil.

When an owner withdraws funds from a farm management deposit in an instalment period, the instalment income of the period will include the amount of the withdrawal. But the owner’s instalment income will only include so much of the withdrawal as will be included in the owner’s assessable income for the income year in which the withdrawal is made. If neither the owner’s tax file number nor Australian Business Number have been quoted to the financial institution that holds the deposit, the amount withdrawn will also be subject to withholding at a rate equal to the sum of the top marginal tax rate and the Medicare levy.

3        Important requirements for farm management deposits

Some of the requirements for farm management deposits are summarised below. There are also other requirements set out in the Act. A breach of some of the requirements will result in the deposit not being treated as a farm management deposit, and the tax benefits will be lost.

·               The depositor must be a primary producer when the deposit is made.

·               The deposit must be made by only one person and on behalf of only one person.

·               Rights of the depositor are not, and must not be, transferable to another person.

·               The deposit must not be used as security for any amount owed to the financial institution or any other person by the depositor or any other person.

·               The deposit must not be used, as a mortgage offset account or otherwise, to reduce the depositor’s liability to pay interest on other debts to the financial institution.

·               Interest or other earnings on the deposit must not be invested as a farm management deposit with the financial institution without having first been paid to the depositor.

·               If the depositor requests, the financial institution must electronically transfer the deposit to another financial institution that agrees to accept it as a farm management deposit.

·               The financial institution must not deduct any fees from the principal of a farm management deposit. However, it may charge fees on the deposit.

4        Repayment of farm management deposits

The tax benefits are not retained for deposit amounts withdrawn in the first 12 months after the deposit was made, unless the withdrawal is made:

      (a)      in exceptional circumstances and the deposit was made before the declaration of exceptional circumstances; or

      (b)      because the owner:

               (i)      dies; or

              (ii)      becomes bankrupt; or

             (iii)      ceases to be a primary producer for 120 days or more; or

             (iv)      has requested the deposit to be transferred to another financial institution.

Part 3          Additional information that is required

        1       The minimum deposit threshold, which is the amount stated at subsection 393–35 (5) of Schedule 2G to the Act.

        2       The maximum deposit limit, which is the amount stated at subsection 393–35 (6) of Schedule 2G to the Act.

        3       That a person can own more than one deposit, but they must all be with the same financial institution and must not total more than the maximum deposit limit.

        4       That the amount of any repayment of the deposit must be at least the amount stated at subsection 393–40 (4) of Schedule 2G to the Act, except where the entire amount of the deposit is repaid.

        5       That the taxable non‑primary production income for the year of income must not exceed the amount stated in paragraph 393–10 (1) (b) of Schedule 2G to the Act.

        6       That any withdrawal made where the depositor has not provided their tax file number nor Australian Business Number will be subject to the withholding rate, which is the sum of:

                (a)    the top marginal tax rate for the income year in the year of deposit; and

               (b)    the Medicare levy.

Notes for item 6

1   The top marginal tax rate is the maximum rate specified in column 3 of the table in Part 1 of Schedule 7 to the Income Tax Rates Act 1986.

2   The Medicare levy is specified in subsection 6 (1) of the Medicare Levy Act 1986.

Note for Part 3   Under paragraph 5 (c), a financial institution is required to insert the figures that are stated in the provisions mentioned in Part 3.

Schedule 3        Information to be given to the Secretary by financial institution

(regulation 6)

  

Note   This information is additional to the information that a financial institution must give to the Secretary under paragraphs 264AA (2) (a), (b) and  (c) of the Act.

        1       The date of the last day of each month being reported.

        2       In relation to each farm management deposit:

                (a)    the industry code for the depositor, by reference to the Australian and New Zealand Standard Industrial Classification Code; and

               (b)    an account number that:

                          (i)    is modified by the financial institution to prevent the disclosure of the identity of the depositor; and

                         (ii)    remains the same while the depositor holds the farm management deposit; and

                (c)    a personal identification number that:

                          (i)    is modified by the financial institution to prevent the disclosure of the identity of the depositor; and

                         (ii)    remains the same while the depositor holds any farm management deposits; and

               (d)    the closing balance of the farm management deposit at the end of each month being reported; and

                (e)    the State or Territory of the depositor’s residence; and

                (f)    the year of birth of the depositor; and

                (g)    the year of deposit; and

                (h)    the month of deposit.


Notes to the Income Tax (Farm Management Deposits) Regulations 1998

Note 1

The Income Tax (Farm Management Deposits) Regulations 1998 (in force under the Income Tax Assessment Act 1936) as shown in this compilation comprise Statutory Rules 1998 No. 325 amended as indicated in the Tables below.

Under the Legislative Instruments Act 2003, which came into force on 1 January 2005, it is a requirement for all non-exempt legislative instruments to be registered on the Federal Register of Legislative Instruments. From 1 January 2005 the Statutory Rules series ceased to exist and was replaced with Select Legislative Instruments (SLI series). Numbering conventions remain the same, ie Year and Number.

 

Table of Instruments

Year and
Number

Date of notification
in Gazette or FRLI registration

Date of
commencement

Application, saving or
transitional provisions

1998 No. 325

9 Dec 1998

2 Jan 1999 (see r. 2)

 

2000 No. 230

17 Aug 2000

1 Sept 2000

2003 No. 205

6 Aug 2003

6 Aug 2003

2007 No. 19

16 Feb 2007 (see
F2007L00300)

17 Feb 2007

Table of Amendments

ad. = added or inserted      am. = amended      rep. = repealed      rs. = repealed and substituted

Provision affected

How affected

R. 5..........................................

am. 2007 No. 19

Schedule 2

 

Schedule 2............................

am. 2000 No. 230; 2003 No. 205

 

rs. 2007 No. 19

Schedule 3

 

Schedule 3............................

rs. 2007 No. 19