If you reinvest your FMD, it is not considered as either assessable income or a deduction.
Reinvestments of FMDs include:
- the extension of the term of the FMD, including where the interest payable is varied
- the immediate reinvestment of a term deposit FMD as an FMD with the same provider
- a transfer of funds to a new FMD provider where the
- existing FMD provider receives the request in writing and is given any other relevant information or assistance from the depositor
- new FMD provider agrees to accept the deposit as an FMD
- transfer is made electronically.
Example 9: Reinvestment 12 months after initial deposit
In the 2017 income year, Neale deposits $280,000 into his FMD account (a term deposit account).
Neale's taxable primary production income for the year exceeded $280,000 and his taxable non-primary production income was less than $100,000. Therefore, his deposit was fully deductible.
In the 2018 income year, more than 12 months after the initial deposit, Neale rolls over (reinvests) $200,000 of his FMD and withdraws $80,000. The rollover amount ($200,000):
- does not count towards his assessable income for the year since it was not withdrawn
- can't be counted as a deduction since it was claimed when it was first deposited.
The $80,000 amount Neale withdrew from the FMD ($80,000) is assessable in the 2018 year.
End of example
Example 10: Reinvestment within 12 months of initial deposit
Karen deposits $50,000 into her FMD account in June 2017. Her deposit was fully deductible. In September 2017, Karen transfers the $50,000 to a new FMD provider on a 12-month term.
The transfer is a reinvestment.
The withdrawal will not count as assessable income as it was reinvested. Karen can still claim the deduction of $50,000 in her 2017 income tax return.
End of example
The Department of Agriculture, Fisheries and Forestry website provides more information about Farm management depositsExternal Link.
If you are a primary producer with an uneven income flow, a farm management deposit (FMD) account may help.