Federal Register of Legislation - Australian Government

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SR 1998 No. 325 Regulations as amended, taking into account amendments up to Income Tax (Farm Management Deposits) Amendment Regulations 2011 (No. 1)
Principal Regulations
Administered by: Treasury
Registered 16 Dec 2011
Start Date 15 Dec 2011
End Date 30 Jun 2015
Date of repeal 18 Oct 2016
Repealed by Treasury Laws Amendment (2016 Measures No. 3) Regulation 2016
Table of contents.

Income Tax (Farm Management Deposits) Regulations 1998

Statutory Rules 1998 No. 325 as amended

made under the

This compilation was prepared on 15 December 2011
taking into account amendments up to SLI 2011 No. 276

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

                        7      Repayment of farm management deposit in the event of a natural disaster    5

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                                                   10

Schedule 3                  Information to be given to the Secretary by FMD provider 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:

1953 Act means the Taxation Administration Act 1953.

1997 Act means the Income Tax Assessment Act 1997.

FMD provider has the meaning given by subsection 393-20 (3) of the 1997 Act.

 

The farm management deposits scheme

Division 393 of the 1997 Act makes arrangements for farm management deposits, which are deposits made with FMD providers in the circumstances described in the Division.

You can deduct a farm management deposit you make if:

(a)     you are an individual carrying on a primary production business  (including a primary production business you carry on as a partner in a partnership or as a beneficiary of a trust); and

(b)     you hold the deposit for at least 12 months; and

(c)     you meet some other tests.

The amount of the deposit repaid is included in your assessable income in the income year in which it is repaid. Special rules apply if the deposit is repaid in exceptional circumstances or in the event of an applicable natural disaster.

Farm management deposits allow you to carry over income from years of good cash flow and to draw down on that income in years when you need the cash. This enables you to defer the income tax on your taxable primary production income from the income year in which you make the deposit until the income year in which the deposit is repaid.

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

                For paragraph 393‑20 (2) (b) of the 1997 Act, Schedule 1 sets out the information to be provided by a depositor.

Note   Subsection 393‑20 (2) of the 1997 Act requires a depositor to apply to an FMD provider to make a farm management deposit with the FMD provider.

Under paragraph 393‑20 (2) (b) of the 1997 Act, the application form must require the depositor to provide any information required by regulations.

Under paragraph 393‑20 (2) (a) of the 1997 Act, 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 393‑20 (2) (c) of the 1997 Act, the form used to apply to an FMD provider to make a farm management deposit 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 393‑20 (2) of the 1997 Act requires a depositor to apply to an FMD provider to make a farm management deposit with the FMD provider.

Under paragraph 393‑20 (2) (c) of the 1997 Act, 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 398‑5 (3) (d) in Schedule 1 to the 1953 Act, Schedule 3 sets out the information that an FMD provider must give to the Secretary to the Department of Agriculture, Fisheries and Forestry.

Note   Section 398‑5 in Schedule 1 to the 1953 Act requires an FMD provider that holds an FMD at the end of a month to give information in writing to the Secretary to the Department of Agriculture, Fisheries and Forestry. The information is described in subsection 398‑5 (3) in Schedule 1 to the 1953 Act, and includes any other information, in relation to farm management deposits held by the FMD provider, that is required by the regulations.

Under subsection 398‑5 (4) in Schedule 1 to the 1953 Act, the regulations must not require information that discloses the depositor’s identity or from which the depositor’s identity could be reasonably inferred.

7              Repayment of farm management deposit in the event of a natural disaster

         (1)   For paragraph 393-40 (3A) (b) of the 1997 Act, this regulation sets out the circumstances that are to be satisfied in relation to a repayment of the whole or a part of a farm management deposit.

Note   Paragraph 393-40 (3A) (b) relates to a repayment if natural disaster relief and recovery arrangements made by or on behalf of the Commonwealth apply.

         (2)   Recovery assistance has been provided:

                (a)    as a Category C measure, as defined in the Natural Disaster Relief and Recovery Arrangements determined by the Attorney-General on 21 March 2011; and

               (b)    in the form of a recovery grant for a primary producer, as described in those Arrangements.

         (3)   The recovery assistance was first provided during the 12 month period mentioned in subsection 393-40 (1) of the 1997 Act.

         (4)   The farm management deposit was repaid after the recovery assistance was first provided.


Schedule 1        Information to be provided by depositor

(regulation 4)

  

1        Depositor’s name, address, date of birth 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 FMD provider issuing this application form is an authorised deposit‑taking institution for the purposes of the Banking Act 1959.

2        Commonwealth, State or Territory guarantee

The Commonwealth, a State or a Territory guarantees the repayment of any deposit taken by the FMD provider 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 deposits scheme

The farm management deposits scheme is designed to allow individuals carrying on a primary production business in Australia, 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 those individuals to manage their exposure to adverse economic events and seasonal fluctuations.

Eligibility criteria apply to individuals carrying on a primary production business in Australia under the scheme.

Note   Primary production business and carrying on a primary production business are explained in subsection 995-1 (1) of the 1997 Act.

2        Tax consequences of farm management deposits

The scheme allows individuals carrying on a primary production business in Australia 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 income 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 a farm management deposit is repaid to an owner in an instalment period, the instalment income of the period will include the amount of the repayment. But the owner’s instalment income will only include so much of the repayment as will be included in the owner’s assessable income for the income year in which the repayment is made.

If neither the owner’s tax file number nor Australian Business Number has been quoted to the FMD provider that holds the deposit, the amount repaid 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 1997 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 owner must be an individual who is carrying on a primary production business in Australia when the deposit is made.

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

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

·                The deposit must not be used as security for any amount owed to the FMD provider or any other entity by the depositor or any other entity.

·                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 FMD provider.

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

·                If the depositor requests in writing, the FMD provider must electronically transfer the deposit, or part of the deposit, to another FMD provider that agrees to accept it as a farm management deposit.

·                The FMD provider 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 repaid within the first 12 months after the deposit was made, unless the repayment 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 carry on a primary production business in Australia and does not start carrying on such a business again within 120 days; or

              (iv)    has requested the deposit, or part of the deposit, to be transferred to another FMD provider; or

         (c)   because the circumstances specified in regulation 7 of the Income Tax (Farm Management Deposits) Regulations 1998, relating to repayment in the event of a natural disaster, exist.

Part 3          Additional information

        1       The minimum deposit threshold is the amount stated in item 4 of the table in section 393-35 of the 1997 Act.

        2       The maximum deposit limit, which is the amount stated in item 10 of the table in section 393-35 of the 1997 Act.

        3       An individual can own more than one farm management deposit, and can own farm management deposits with different FMD providers, but the sum of the balances of all of the farm management deposits of an owner must not be more than the maximum deposit limit.

        4       The amount of any repayment of the deposit must be at least the amount stated in item 12 of the table in section 393-35 of the 1997 Act, except where the entire amount of the deposit is repaid.

        5       The taxable non‑primary production income for the year of income must not exceed the amount stated in paragraph 393‑5 (1) (d) of the 1997 Act.

        6       If the depositor has provided neither the depositor’s tax file number nor the depositor’s Australian Business Number, any repayment 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), an FMD provider 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 FMD provider

(regulation 6)

  

  

Note   This information is additional to the information that an FMD provider must give to the Secretary under paragraphs 398-5 (3) (a), (b) and (c) in Schedule 1 to the 1953 Act.

        1       The 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 FMD provider to prevent the disclosure of the identity of the depositor, the owner or both; and

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

                (c)    a personal identification number that:

                          (i)    is modified by the FMD provider to prevent the disclosure of the identity of the depositor, the owner or both; and

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

               (d)    the closing balance of the farm management deposit at the end of the month to which the report relates; and

                (e)    the State or Territory of the residence of the owner; and

                (f)    the year of birth of the owner of the farm management deposit; 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.

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

2011 No. 276

15 Dec 2011 (see F2011L02690)

15 Dec 2011

Table of Amendments

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

Provision affected

How affected

R. 3..........................................

rs. 2011 No. 276

R. 4..........................................

rs. 2011 No. 276

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

am. 2007 No. 19

 

rs. 2011 No. 276

R. 6..........................................

rs. 2011 No. 276

R. 7..........................................

ad. 2011 No. 276

Schedule 1

 

Schedule 1.............................

am. 2011 No. 276

Schedule 2

 

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

am. 2000 No. 230; 2003 No. 205

 

rs. 2007 No. 19; 2011 No. 276

Schedule 3

 

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

rs. 2007 No. 19; 2011 No. 276