The Government announced changes to the Farm Management Deposit (FMD) scheme in the Agricultural Competitiveness White Paper on 4 July 2015 to ensure it remains a valuable and useful tool for farmers. The existing FMD Scheme allows farmers to set aside funds in good years to provide for low income years, and only pay tax when the funds are withdrawn. The changes announced include:
- a doubling of the deposit limit for FMDs from $400,000 to $800,000;
- the removal of legislative restrictions placed on financial institutions preventing FMD accounts being used as a farm business loan offset; and
- introducing early access provisions for farmers in severe drought.
Exposure draft legislation and explanatory material to implement this announcement is released for consultation.
Key features include that FMDs may be used to offset farm business loans held by individuals or partnerships from 1 July 2016. This exposure draft proposes amendments to remove the previous loss of FMD status for such use, and introduces an alternate administrative penalty for offsets that breach the new rules. Farmers may also access their FMDs within 12 months while retaining the taxation benefit, provided they meet the rainfall deficiency criteria using the online ABARES tool.