When a deposit is made into an income equalisation scheme, the general rule is that it is accepted for the tax year in which the deposit is received. To be deductible in any income year, the deposit must be made within the specified period after the end of that income year. This is the shorter of:
- six months after the balance date
- one month after the due date for filing the return.
A specified period applies to both deposits and refunds.
Deposits and myIR
You can now manage all your deposits in myIR.
Any deposits into your income equalisation (EQU) or environmental restoration (ERA) accounts will be:
- reflected in your income profile
- pre-populated into the 'other income' field of your income tax return.
Restrictions on deposits
- The minimum income equalisation deposit is $200.
- The minimum environmental restoration deposit is $1,000.
Deposit amounts cannot exceed your net income from your qualifying activity in the year the deposit is accepted.
Deposits to reserve schemes need to be made electronically.
Interest on deposits
Interest of 3% per annum will apply where a deposit is left in the scheme for a period of 12 months or more. Interest paid becomes part of the deposit and is credited at 31 March each year or when the deposit is refunded.
Interest is not treated as income in the tax year it is credited, only in the tax year when the deposit is refunded.
Resident withholding tax (RWT) should be deducted from any interest paid.
Income equalisation deposit time limit
Income equalisation deposits expire 5 years from the end of the accounting year in which the deposit was made. Any expired deposits will be refunded.
New deposit following a refund
If a refund has been made in a tax year, a deposit cannot be made after that date for the same period unless we are satisfied that all of the refund was used in 1 of the following situations:
- developing or expanding your business
- purchasing livestock for use in your farming business to replace livestock disposed of, or lost as a result of a self-assessed adverse event.
The refund may be able to be used as a deposit for the previous tax year if an election is made in the specified period or by the required date for that tax year.
The required date is the earlier of:
- one month from the date of filing the return of income for the accounting year
- one month from the date the return of income is due to be filed.
Mr Forrest's balance date was 30 June 2017 with a tax agent extension of time to file till 31 March 2018.
His return was filed on 15 January 2018, so any deposits or refunds made up until 15 February 2018 will be accepted for the 2017 tax year.
Mr Forrest requests a refund on 30 September 2018 of $5,000. He includes this income in the 2019 tax year.
We will pre-populate the deposit into his tax return if he files through myIR or gateway services.
As Mr Forrest has a tax agents' extension of time to file his 2018 return up until 31 March 2019, he makes an election that the $5,000 be deposited for the 2018 tax year.