Farm Management Deposits

The Australian Government has announced Farm Finance, which builds the ongoing financial resilience of farmers who are currently struggling with high levels of debt.

Further information about Farm Finance and the support available for farmers experiencing debt stress can be found at daff.gov.au/farmfinance.

Enhancements to the Farm Management Deposits (FMD) Scheme

Under Farm Finance, enhancements will be made to the FMD Scheme. These are:

• increasing the non-primary production income threshold for FMDs from $65 000 to $100 000
• allowing consolidation of existing eligible FMD accounts.

These changes will come into effect from 1 July 2014.

The FMD Scheme assists primary producers to deal more effectively with fluctuations in cash flow. It is designed to increase the self-reliance of Australian primary producers by helping them manage their financial risk, meet their business costs in low-income years and facilitate increased financial self-reliance.

The scheme allows eligible primary producers to set aside pre-tax income from primary production in years of high income, which they can draw on in years of low income.

Income deposited into an FMD account is tax deductible in the year the deposit is made. It becomes taxable income in the year in which it is withdrawn.

Current FMD eligibility settings

The following conditions apply:

• A farmer’s non–primary production income threshold must be less than $65 000.
• 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 (see below).

Eligibility requirement for withdrawal within 12 months for primary producers affected by natural disasters

As announced in the 2011–12 Budget, eligible primary producers affected by natural disasters can withdraw their FMDs within the first 12 months of deposit without losing their taxation benefits if they are currently accessing, or have accessed, primary production Category C recovery assistance. Visit the Australian Government Disaster Assist website for more information on assistance available following natural disasters and to check the status of your Local Government Area.

To be eligible, primary producers must:

• Be affected by certain natural disasters and have received assistance through an NDRRA primary producer Category C measure recovery grant, on or after 1 July 2010
• Have deposited the funds into an FMD account prior to accessing the primary producer Category C measure recovery grant.
• Withdraw the funds from the FMD account after accessing the primary producer Category C measure recovery grant. The amount of the withdrawal is taxable income in the income year that the withdrawal is made.
• The amount of the withdrawal is assessable income in the year the withdrawal is made, and no deduction may be claimed for any subsequent deposits made in the same income year.

Eligibility requirements for withdrawal within 12 months for primary producers in Exceptional Circumstances (EC) declared areas

• The deposit must have been made before the EC declaration for the FMD holder’s area came into force.
• To confirm their EC status, the FMD holder must obtain an EC certificate from Centrelink no later than three months after the end of the income year in which the withdrawal is made.
  The amount of the withdrawal is assessable in the income year in which the withdrawal is made and no deductions can be claimed for any subsequent deposits made in the same income year.

The National Rural Advisory Council’s Review of the FMD Scheme

The National Rural Advisory Council (NRAC) conducted an Assessment of the effectiveness of the Farm Management Deposits Scheme.

The findings were released by the Minister for Agriculture, Fisheries and Forestry on 27 April 2013.

The full report, Report on the effectiveness of the Farm Managements Deposits Scheme can found on the DAFF website.

FMD Statistics

Latest quarterly FMD Statistics and detailed state/territory and industry totals.

For more information

• Tax Office Business Tax Enquiries phone 13 28 66
• Tax Practitioners phone 13 72 86
• Farm Management Deposits scheme guide on the Tax Office website 
• Income Tax Assessment Act 1997