As farm businesses prepare for budget planning in 2014, operators can access the latest information on Farm Management Deposits (FMDs) from the Department of Agriculture and Food.
FMDs are designed to help farm businesses guard against fluctuating businesses conditions and better meet costs in low income years.
Department Senior Economist Peter Rixson said FMDs were an option for farm businesses to consider as part of their regime to manage financial risk or for those preparing to expand their business.
“Many grain growers have experienced a solid year due to a favourable end to the season and reasonable prices,” Mr Rixson said.
“In good years, FMDs provide a legitimate and potentially valuable tax management tool.”
The national scheme was introduced in 1999 to promote risk management and preparedness for primary producers.
It has attracted broad uptake from the farming sector. As of June 2013, there were 5096 deposits in WA totalling more than half a billion dollars.
Mr Rixson said FMDs were especially important for farm businesses with uneven profit levels due to seasonal or price variations.
The scheme allows individual farmers who earn less than $65,000 ($100,000 from 1 July 2014) in off-farm income to deposit funds, tax free, into FMDs for use in later years.
Depositing funds into FMDs allows farmers to reduce their taxable income and therefore tax payable the year it is made.
“Provided deposits remain in FMDs for more than 12 months, these deposits allow farmers to reduce the amount of tax they pay in an individual year,” Mr Rixson said.
“When deposits are withdrawn the amount is included in taxable income for that year and the tax due is calculated at that time.”
The maximum amount an individual can have on deposit is $400,000. A farm with a partnership arrangement (two qualifying individuals) can hold up to $800,000.
A Farm Management Deposits Farmnote is now available from the department website agric.wa.gov.au [1]search under the Farmnote series.
Further information about Farm Management Deposits can be found on Australian Department of Agriculture website daff.gov.au [2] or the Australian Tax Office (ATO) website ato.gov.au [3] enter ‘NAT1712’ and/or ‘Farm Management Deposits’ in the ‘Search for’ box at the top of the page.
Banks, financial advisors, or the Australian Association of Agricultural Consultants (AAAC) can also provide information on FMDs.
Media contacts: Jodie Thomson/Lisa Bertram, media liaison +61 (0)8 9368 3937