August 15, 2016
The Australian Government has made changes to the Farm Management Deposits (FMD) Scheme. As of 1st July 2016, the following three changes were made to the scheme in the Agricultural Competitiveness White Paper.
Primary producers can now:
- Individually hold up to $800,000 in FMDs
- Subject to banks offering these products, use FMDs to offset the interest costs on primary production business loans
- Withdraw their FMDs within 12 months of deposit without losing their claimed concessions if they have been affected by drought.
These changes can have significant taxation implications for primary producers.
Total deposit limits for individuals holding FMDs has doubled from $400,000 to $800,000.
Primary producers (sole traders, partners in partnerships and primary production trust beneficiaries) can hold FMDs with multiple banks and credit unions. However, individually they must not hold more than $800,000 in FMDs at any point in time (an increase from the previous $400,000 up until 30 June 2016)
An early access in drought provision has been reintroduced.
A new trigger allows primary producers affected by drought to withdraw their FMDs within 12 months, on or after July 1 2016. A primary producer who made an FMD deposit in the previous financial year and held it for at least six months can retain their claimed taxation benefit if they can demonstrate than an area of their farming property has been affected by a rainfall deficiency for six consecutive months.
To be eligible, rainfall must have been within the lowest five per cent of recorded rainfall for their property for that six-month period. An online tool, called the FMD Rainfall Analyser, is available on the Bureau of Meteorology website for primary producers to determine their eligibility. Click here for the online tool. For tax purposes, primary producers should print and retain a copy of the report that demonstrates their eligibility to withdraw their FMD early.
It is important that you speak with your accountant regarding these requirements.
FMD accounts can now be used to offset the interest costs of primary production business loans.
From 1 July 2016, banks, if they choose to, can offer FMD offset accounts to primary producers who are sole traders or partners in a partnership as an offset against money borrowed for their primary production business.
Please click here to read the fact sheet provided by the Department of Agriculture and Water Resources.