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Does a deduction for a superannuation contribution reduce the taxpayer's 'taxable non-primary production income' calculated under subsection 392-85(1) of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes, the deduction for a superannuation contribution reduces the taxpayer's 'taxable non-primary production income' calculated under subsection 392-85(1) of the ITAA 1997.

The taxpayer is carrying on a business of primary production but is also deriving more than $100,000 non-primary production income. The taxpayer is making contributions to a superannuation fund.

The taxpayer wishes to make a farm management deposit.

Section 393-5 of the ITAA 1997 allows a deduction for a farm management deposit if certain conditions are satisfied. One of the conditions, at paragraph 393-5(1)(d) of the ITAA 1997, provides that a taxpayer's 'taxable non-primary production income' cannot exceed $100,000.

Where the 'assessable non-primary production income' exceeds the 'non-primary production deductions', the 'taxable non-primary production income' equals the difference (subsection 392-85(1) of the ITAA 1997) between them.

'Non-primary production deductions' are defined in subsection 392-85(3) of the ITAA 1997. The 'non-primary production deductions' are the difference between any deductions and any 'primary production deductions'.

'Primary production deductions' are defined in subsection 392-80(3) of the ITAA 1997 and include all amounts that you can deduct that relate exclusively to the 'assessable primary production income', and other amounts that you can deduct that reasonably relate to the 'assessable primary production income'.

The Commissioner considers that 'primary production deductions' do not include deductions for superannuation contributions because they do not reasonably relate to the 'assessable primary production income'.

Consequently, the deduction for the superannuation contributions will increase the 'non-primary production deductions' and therefore reduce the 'taxable non-primary production income' calculated under subsection 392-85(1) of the ITAA 1997.

Date of amendment Part Comment 1 July 2014 Issue, Decision, Reasons for Decision, Legislative References Updated legislative references to replace sections and subsections in former Divisions 363 and 393 in Schedule 2G of the ITAA 1936 with sections and subsections in Divisions 392 and 393 of the ITAA 1997. Facts Change in taxpayer's non-primary production income to $100,000. Reasons for Decision Updated non-primary production threshold to increase from $50,000 (and later $65,000) to $100,000 per section 393-5 of the ITAA 1997 effective 1 July 2014. Keywords Add 'Farm management deposits'.

Date of amendment | Part | Comment

1 July 2014 | Issue, Decision, Reasons for Decision, Legislative References | Updated legislative references to replace sections and subsections in former Divisions 363 and 393 in Schedule 2G of the ITAA 1936 with sections and subsections in Divisions 392 and 393 of the ITAA 1997.

Facts | Change in taxpayer's non-primary production income to $100,000.

Reasons for Decision | Updated non-primary production threshold to increase from $50,000 (and later $65,000) to $100,000 per section 393-5 of the ITAA 1997 effective 1 July 2014.

Keywords | Add 'Farm management deposits'.