Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX (FARM MANAGEMENT DEPOSITS) AMENDMENT REGULATIONS 2000 (NO. 1) 2000 NO. 230

STATUTORY RULES 2000 No. 230

Issued by authority of the Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax (Farm Management Deposits) Amendment Regulations 2000 (No. 1)

Section 266 of the Income Tax Assessment Act 193 6 (the Act) provides that the GovernorGeneral may make regulations prescribing matters required to give effect to the Act.

The purpose of the Regulations is to update explanatory statements prescribed in the Income Tax (Farm Management Deposits) Regulations 1998 to take account of the changes to the farm management deposits (FMD) scheme on and from 1 July 2000. These changes are consequential upon the commencement of the Pay As You Go (PAYG) arrangements in the Taxation Administration Act 1953.

The FMD scheme allows an eligible primary producer (the owner), in effect, to shift income from good to bad years in order to deal with adverse economic events and seasonal fluctuations. Broadly, from 1 July 2000, the scheme operates as follows: primary producers claim deductions for FMDs (and reduce their PAYG instalments income) in the year of deposit; and include those FMD repayments in both their PAYG instalments income and their assessable income in the repayment year to the extent that a deduction was previously claimed.

Paragraph 393-30(3)(c) in Schedule 2G to the Act requires the owner to apply to a financial institution to make the deposits by completing and signing an application form that contains statements prescribed by the Regulations that are to be read by the owner at the time of completing the form. The statements that must appear in the application form are set out in Schedule 2 to the Income Tax (Farm Management Deposits) Regulations 1998. They include statements about the tax consequences of the FMD scheme. Currently, those statements reflect the income tax law to 30 June 2000.

The Regulations amend the existing explanatory statements in Schedule 2 so that they reflect the changes made by the PAYG arrangements. These new PAYG arrangements replaced the Pay As You Earn and other withholding systems from 1 July 2000 and the provisional tax and company instalments systems with effect for the 2000-2001 income year.

The Regulations commence on 1 September 2000.