• Farm management deposits scheme

    Farm management deposits (FMD) are a risk-management tool to help farmers deal with uneven income, which is common in agriculture because of natural disasters, climate and market variability. The FMD scheme complements other risk-management strategies available to primary producers, such as developing fodder and water reserves, financial planning and diversifying production systems.

    If you are a primary producer, this scheme allows you to:

    If you withdraw an FMD, the amount of the deduction you claimed is included in your assessable income in the income year the deposit is repaid to you – see Assessable income.

    Consolidating multiple FMDs will have no tax consequences provided you meet the requirements for merging deposits.


    To be eligible for the FMD scheme, you must be:

    • carrying on a primary production business at the time you make a deposit
    • be an individual (including as a partner in a partnership or beneficiary of a trust) – companies and other entities are not eligible. Note: FMDs cannot be made by two or more people jointly, or made on behalf of two or more people
    • have taxable non-primary production income not exceeding $100,000 ($65,000 prior to 1 July 2014).

    Trustees can only enter FMD agreements on behalf of a beneficiary who is entitled to a share of the income of the trust estate and is under a legal disability – for example, if they are a minor.

    If you are the beneficiary of a primary production trust that made a loss, you are still considered to be in a business of primary production, and eligible for the FMD tax concessions if either of the following apply:

    • the trustee of the primary production trust nominated you as a chosen beneficiary
    • you are the beneficiary of a fixed trust.

    See also:

    Making deposits

    How much to deposit

    If you are eligible to make an FMD, you need to make sure your deposits are both:

    • at least $1,000
    • not more than $800,000 in total at any one time.

    Note: at the time of making a deposit, you may not know if the amount deposited is eligible to be treated as an FMD. For example, you may not know your taxable non-primary production income amount. You need to keep track of which deposits you have claimed a tax deduction for and any later found to be non-deductible. You should withdraw any FMD (or part of an FMD) that is non-deductible as soon as possible, for example when the deposit matures, so you can better manage and track your deposits.

    Where to make deposits

    You can make deposits with more than one FMD provider.

    An FMD provider is an authorised deposit-taking institution (ADI), or an entity that has a Commonwealth, state or territory guarantee for deposits.

    All banks, building societies and credit unions are ADIs. They are regulated by the Australian Prudential Regulation Authority (APRA).

    See also:

    • List of authorised deposit-taking institutions

    Setting up an account

    You must:

    • have an agreement in place with your FMD provider that describes your deposit as a farm management deposit
    • apply to the FMD provider to make a deposit by completing and signing an application form – this can be done electronically – that makes provision for your tax file number (TFN) or Australian business number (ABN).

    If you do not quote your TFN or ABN to the FMD provider, the amount of the deposit repaid to you will be subject to withholding tax at the top marginal tax rate plus any applicable levies, such as the Medicare levy.

    Consolidating multiple deposits

    The tax laws have changed to allow you to consolidate deposits into a single FMD without any tax consequences.

    Up until 30 June 2014, if you combine your deposits into a single deposit, the tax law regards the deposits as being repaid to you, and therefore included as assessable income.

    From 1 July 2014, you can consolidate without the original deposits becoming assessable income, provided the combined deposit meets the requirements outlined below.

    If you combine multiple FMDs into a new FMD, you will need to enter into a new agreement with your FMD provider.

    However just be aware that having all of your FMDs recorded on a single account doesn't necessarily mean the deposits have been consolidated into a single deposit. FMD providers may be able to offer you a single FMD account facility that records new and existing deposits – in this case, all deposits and withdrawals should be shown individually on your account.

    From 1 July 2014 you may consolidate two or more deposits into a single deposit without any tax consequences provided that, after merging your deposits, the consolidated deposit contains only amounts that you have:

    • held for at least 12 months
    • claimed a tax deduction for.

    Note: Some FMD providers have already offered merged deposit facilities which provide the benefits of a consolidated deposit, but don't meet the above requirements. You can fix this quickly by withdrawing any amounts from a consolidated deposit that don't satisfy these rules.

    Consolidated FMDs are taken to be made on the same day as the most recent of the original deposits being consolidated. This ensures the consolidated deposit has also been held for at least 12 months.

    Account terms

    Your deposit can be held in accounts of any type, including at-call accounts. Your FMD provider cannot at any time deduct any administration fee or other amount required from your deposit amount.

    Your rights as a depositor cannot be transferred, and the deposit itself cannot be encumbered. This means you:

    • cannot use the deposit as security for any amount you owe to the FMD provider or any other person
    • cannot reinvest the interest or other earnings on your deposit as a FMD with the FMD provider without the earnings being paid to you first – for example, into a non-FMD account.

    Transfers of deposits between FMD providers must be made electronically.

    From 1 July 2016, amounts you hold in an FMD can be used in an interest offset arrangement against loans or other debts relating to your primary production business. You may be liable to a penalty if the FMD is offset against loans or other debts that do not relate to your primary production business.

    Claiming deductions

    You can claim a deduction for deposits you make in the income year you made them. You cannot claim a deduction for deposits in the current income year if:

    • your taxable non-primary production income for the income year is more than $100,000 for income years beginning from 1 July 2014 (before 1 July 2014 $65,000)
    • you die during the year
    • you become bankrupt during the year
    • before the end of the year you stop carrying on a primary production business for 120 days or more.

    Any deduction you claim cannot be more than:

    • the sum of the deposits you made
    • your taxable primary production income for the income year
    •  an amount that causes your total FMDs to be more than the $800,000 account limit.

    You cannot claim a further tax deduction on the transfer, reinvestment or extension of existing deposits. Therefore in these situations:

    • your taxable non-primary production income is not limited to $100,000
    • your consolidated deposit amount is not limited to your taxable primary production income for the year.

    You must cancel your deduction claim if the deposit is repaid to you in the next year and within 12 months after it was made, unless your deposit was repaid to you:

    • as a result of certain natural disasters
    • as a result of you experiencing severe drought
    • because you  
      • die
      • become bankrupt
      • stop carrying on a primary production business for 120 days or more.

    If your deduction must be cancelled, you must request an amendment of your assessment for that previous income year. Penalty and interest charges may apply, so act promptly.

    Example – Deposit partly repaid within 12 months

    On 1 November 2009, Angela, a farmer, made an $8,000 deposit into an FMD account. For the income year ended 30 June 2010, Angela claimed an FMD deduction of $8,000. On 1 October 2010, Angela withdrew $5,000 from her FMD account.

    The $3,000 that remains in her FMD account still qualifies as an FMD deduction if it remains in her account until 1 November 2010. The $5,000 she withdrew is not – and is considered never to have been – part of her deposit.

    As a result, Angela has to request an amendment for the income year ended 30 June 2010 to reduce her FMD deduction claim by $5,000.

    End of example

    If you have been experiencing severe drought or affected by certain natural disasters, you can:

    • access funds within 12 months of you making the deposit
    • retain the tax deduction for the original amount in the income year you made the deposit; the repayment is assessable in the year it is repaid.

    See also:

    Assessable income

    Repayments are assessable primary production income if you claimed a deduction for your deposit. The most common repayment is a withdrawal of your deposit.

    The following repayments are not assessable:

    • immediate reinvestment into another FMD
    • extension of the term of the FMD
    • consolidation of FMDs.

    Making withdrawals

    The minimum amount you can withdraw from your deposit is $1,000, unless the entire balance of the deposit is being repaid to you.

    If your FMD is treated as repaid, and the deposit has been claimed as a deduction, you need to either:

    • amend your previous tax return to cancel the deduction if repaid within 12 months and an exception does not apply
    • declare the amount repaid as income.

    See also:

    Other assessable amounts

    Un-recouped deposits – that is, deposits allowed as a deduction that have not been repaid to you – are treated as repaid and assessable when you:

    • die, and therefore included in the date of death return
    • become bankrupt
    • stop being a primary producer for 120 days or more.

    When you must close your deposit

    If you stop being eligible to hold an FMD, you will be deemed to have closed your FMD 120 days after you stopped being in primary production, if you hadn't closed it earlier. You must include the total balance of your FMD account in the income return year that you closed the account.

    You may become ineligible to hold the FMD because you:

    • stopped primary production for 120 days or more
    • no longer receive primary production income as a beneficiary of a trust.

    Deductible and non-deductible amounts

    FMDs can contain both deductible and non-deductible deposits. Receiving repayments of deposits you have not claimed a deduction for (non-deductible deposits) are not considered to be assessable income. When you receive a repayment, you are considered to have withdrawn any non-deductible amounts first.


    Interest you earn on your deposits is assessable in the year it is earned. However, interest you earned on deposits cannot be invested as an FMD without being paid to you first.

    Pay as you go instalment income

    Under the pay as you go (PAYG) system, withdrawals are considered part of your instalment income for that instalment period.

    • Making FMDs reduces your instalment income for the period, but your instalment income cannot be reduced below zero.
    • Receiving repayments of FMDs increases your instalment income.

    Taxable primary production income

    Taxable primary production income is your assessable primary production income less (minus) any allowable deductions relating to earning that income. If your deductions are more than your income, then your taxable primary production income amount is nil.


    • personal super contributions are not primary production deductions
    • the cost of managing your tax affairs may need to be apportioned.

    Taxable non-primary production income

    Taxable non-primary production income is your assessable non-primary production income less any allowable deductions, other than those used in calculating your taxable primary production income. If your deductions are more than your income, then your taxable non-primary production income amount is nil.

    • Last modified: 08 Jul 2016QC 27154