You might have heard of the farm management deposits (FMD) scheme which is in place to help primary producers to manage uncertainty in their cash flow. As a farmer or primary producer, you may be eligible for these benefits (or Australian Government farm loans) and can access these concessions to help you during times of adversity. The way in which this scheme works is that you get concessional tax treatment during good years and can draw on these later when you need the funds.
The farm management deposit (FMD) is managed by the Department of Agriculture and Water Resources while the Australian Taxation Office is responsible for the administration of the scheme. At EZ Machinery we want to help our Aussie farmers in whatever way we can and are here to support you. We wanted to discuss this farm management deposits scheme in the hopes that it helps you get more information on what can be a helpful resource.
Am I eligible for the FMD?
You will be eligible for the FMD scheme and can claim a deposit, providing that you are an individual who is carrying on a primary production business when you make a deposit. You must also make not more than $100,000 non-primary production income in the income year that you make your deposit. You must also not hold more than $800,000 in your total FMD amount.
- If you’re a company, you are not eligible for the FMD scheme, and a deposit cannot be made by two or more people jointly.
- A trustee can make a deposit on behalf of a beneficiary
A deposit that you make into an FMD account is going to be tax deductible if you meet certain conditions. You can read more about the FMD information on the Department of Agriculture and Water Resources page here.
Your FMD account
You can hold an FMD deposit in any kind of account provided that it meets the conditions set out below:
- When opening your account, the deposit with an FMD provider is an FMD if the deposit is made under an agreement between you and the FMD provider
- Deposits must be described as FMD and be over $1,000 in total
- The total amount of deposits you hold must not be more than $800,000
- Any interest paid on your deposits is assessable in the income year you receive it
- Any transfers made between FMD providers must be made electronically
Making deposits into your FMD
As an eligible farmer, you can claim a deduction for a FMD in the year you make the deposit. But any deduction you claim cannot be more than your total taxable primary production income for the year, and it cannot be any amount that is going to cause your FMD total to be over $800,000.
- Any interest that you earn on your FMD has to be paid to the FMD owner, not to the FMD account and any interest that you earn on your FMD is going to be included in your assessable income. Note that FMD interest is not primary production income.
- You can’t make a claim on any tax deduction for any part of an FMD deposit that you withdraw within 12 months unless there is an exception.
- Exceptions include when an FMD owner dies or becomes bankrupt; in a drought; when assistance is received in the event of a natural disaster; when a FMD owner ceases to carry on a primary production business for 120 days or more.
Repayments made from an FMD
The most common type of repayment for an FMD is the withdrawal of a deposit. There are deductible and non-deductible deposits which can be considered, as well as deemed repayments.
- A non-deductible deposit is a deposit where you haven’t claimed this as a tax deduction, and a repayment of a non-deductible deposit is not assessable income. If your FMD has both tax deductible and non-deductible deposits in it, any non-deductible amounts are considered to have been withdrawn first.
- Deemed repayments are considered to be repaid when an FMD owner dies or becomes bankrupt, or otherwise ceases carrying on a primary production business.
Find out more about the FMD scheme with the ATO here. You can also read more about farm investment loans here if you are finding that you are struggling financially and need a little help to get back on your feet.