What is the Farm Management Deposits (FMD) scheme?

The farm management deposits scheme (FMD) can help primary producers deal with years of varying income, by allowing primary producers to make tax deductible deposits during years of good cash flow and withdraw them (as assessable income) during low years.

Who is eligible to claim a deduction?

To be eligible to claim a deduction for a deposit to an FMD account, you must satisfy all of the following:

• Be an individual (including a partner in a partnership, or a beneficiary of a trust)
• Be carrying on a primary production business in Australia when you make a deposit
• Have no more than $100,000 in taxable non-primary production income in the income year you make the deposit
• Hold no more than $800,000 in total in FMDs

What are the FMD account eligibility requirements?

• You may hold multiple FMD accounts with multiple providers
• Your FMD provider is not allowed to deduct administration fees or other amounts from your deposit
• You apply to an FMD provider to make a deposit by completing and signing an application that meets the regulatory guidelines. This can be done electronically
• Your deposit is made under an agreement between you and the FMD provider
• The amount of any deposit or repayment must be $1,000 or more
• The total of all deposits you hold must not be more than $800,000
• Interest earned on deposits is assessable to you in the income year in which it is paid (it is not considered primary production income), and the interest must not be paid into an FMD account
• Your rights as a depositor can’t be transferred to another individual
• The deposit can’t be subject to encumbrance – this means you can’t use the deposit as security for any amount you owe the FMD provider or any other person
• The deposit amounts must not:
  • be more than your taxable primary production income for the income year
  • cause your total FMD account balances to be more than $800,000

What’s the difference between deductible and non-deductible FMD deposits?

Your FMDs may contain both deductible and non-deductible deposits. As the FMD owner, it is your responsibility to keep track of the different amounts in your FMD. Under the law, the non-deductible components of your deposit must be repaid first.

Non-deductible deposits include:

• Deposits withdrawn within 12 months (unless an exception occurs)
• A reinvestment
• A consolidation

This article provides general information only and does not constitute personal financial, tax or legal advice. Eligibility rules and thresholds are current at the time of writing and may change. You should consider your own circumstances and seek advice tailored to your situation before making any decision about Farm Management Deposits.