More Australian farmers will soon be able to use the Farm Management Deposits Scheme to prepare for the tough times following improvements made by the Government.
Farm Management Deposits (FMDs) are an important financial and risk management tool for farmers. During times of hardship they can face several years of very little income, or in some years, no income at all.
Farm Management Deposits allow farmers to put income aside in good years and manage tax obligations over a number of years, reducing unpredictable variations that can cause unnecessary disruption to farming enterprises.
Also, having money set aside in a Farm Management Deposit to draw on in lean years can help farmers bring their businesses back to profitability when conditions improve.
Data on the Farm Management Deposit Scheme shows the total value of Farm Management Deposits was worth $3.22 billion in May 2014. Since the scheme’s inception in 1999, the total value of Farm Management Deposits has regularly fluctuated – for example, from $3.7 billion in mid-2013 down to the current $3.2 billion - as farmers made good use of the scheme to cope with recent adverse farming conditions.
Differing conditions in particular sectors can also be seen reflected – for example, Western Australian grain producers have doubled their total Farm Management Deposits in the past four years to $156 million, whereas those of Queensland beef producers have fallen in the past 12 months.
With legislative amendments now complete, from 1 July 2014 farmers and other primary producers can:
- earn up to $100,000 – up from the previous limit of $65,000 – in non-primary production or ‘off-farm’ income and still be eligible to create new Farm Management Deposits in that same year;
- consolidate multiple Farm Management Deposit accounts that have been held for more than 12 months without income tax consequences, reducing the administrative burden for both farmers and deposit-taking institutions.
The Government has also made administrative changes to the Farm Management Deposits Scheme to permanently exempt them from the unclaimed moneys provisions, in recognition of the long-term nature of Farm Management Deposits.
This exemption will give farmers peace of mind that their Farm Management Deposits won’t disappear into consolidated revenue and will be there when they need it.
For more information is available on the Department of Agriculture website or contact an appropriately qualified financial or taxation advisor.