A Guide To Farm Management Deposits Scheme

Designed as a risk management tool, the Farm Management Deposit scheme (FMD), encourages farmers to set aside pre-tax income in good years for use in low-income years. With farm productivity susceptible to even the slightest variances of climate, production or market conditions, FMDs can be a useful strategy to employ, alongside others such as developing water reserves, accumulating stock fodder and diversifying farm production.

Currently, FMDs are available to primary producers with a taxable non-primary production income of no more than $65,000 in the year of deposit and for investments totalling no more than $400,000 per farmer. Please note, however, that under federal government enhancements made to the FMD scheme in April 2013, the non-primary production income threshold for FMDs will increase from $65,000 to $100,000 on 1 July 2014.

As with most government schemes, the carrot is the tax advantage. When you make a farm management deposit of $1,000 up to $400,000 at the one financial institution, you effectively defer the income tax you would normally pay on that amount. The stick is that if you withdraw money in lean times, this amount is taxable in the income year the withdrawal is made. You cannot then claim a deduction for any subsequent deposits made in the same year.

To be eligible for a FMD, the following applies: A farmer?s non–primary production income threshold must be less than $65 000 (rising to $100,000 from 1 July 2014 as noted above). A farmer may hold up to a maximum of $400 000 in multiple Authorised Deposit–taking Institutions (ADIs). To be classified as an FMD, the deposit must be held for at least 12 months with a deposit–taking institution (for example a bank, credit union or building society), authorised under the Banking Act 1959 (Cwlth). Eligible farmers who are receiving primary producer Category C recovery assistance following a natural disaster under the Natural Disaster Relief and Recovery Arrangements (NDRRA), or are in Exceptional Circumstances–declared areas, may be eligible to access their FMDs within 12 months while retaining the tax benefits of the scheme. Source: www.daff.gov.au

 

According to the Department of Agriculture, Fisheries and Forestry (DAFF), total holdings in the Farm Management Deposits (FMD) Scheme as at 30 June 2013 were at an all-time high of $3.72 billion. For more information on applying for a Farm Management Deposit, go to daff.gov.au.

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