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  • Farm management deposits

    If you are a primary producer with an uneven income flow, a farm management deposit (FMD) account may help.

    FMD accounts are provided by selected financial institutions. The Department of Agriculture manages FMD account policy. We are responsible for the tax administration.

    You can claim a tax deduction for deposits you make into an FMD account if you meet the conditions. When you withdraw, these deposits count as part of your assessable income for that year.

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    Eligibility

    To receive the tax benefits from having an FMD account:

    • you need to be eligible
    • your account has to meet certain requirements.

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    Your eligibility

    To be eligible to claim a deduction for a deposit to an FMD account, you must:

    • be an individual (including a partner in a partnership or 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.

    Companies and other entities are not eligible for an FMD. You can't make a deposit jointly with another person or people.

    If you're a trustee, you can make deposits on behalf of a beneficiary who is presently entitled to a share of the income of the trust estate if the beneficiary under a legal disability, for example, they are a minor.

    Example 1 – Excess non-primary production income

    Darren is a primary producer who deposits funds into an FMD term deposit.

    During the year, Darren also earned non-primary production income from:

    • rental property
    • interest from investments
    • salary and wages from a second job.

    After taking into account his allowable deductions for that income, his taxable non-primary production income total is $120,000.

    Because this is more than the maximum threshold of $100,000, Darren's deposits into the FMD are not tax deductible.

    End of example

    FMD account terms

    Your FMD deposit may be held in any type of account (including at-call accounts) that meets the requirements set out below.

    You may hold multiple FMD accounts with multiple providers.

    The total balance of all your FMD accounts can't be more than $800,000.

    Your FMD provider is not allowed, to deduct administration fees or other amounts from your deposit.

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    Opening the account

    Your deposit with an FMD provider is counted as an FMD if both conditions are met:

    • 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.

    Account agreement

    The account agreement must describe the deposit as an FMD. It must contain the following conditions:

    • The amount of any deposit or repayment must be $1,000 or more.
    • The total of all deposits you hold can't be more than $800,000.
    • Interest earned on deposits is assessable to you in the income year in which it is paid. Interest must not be paid into an FMD account.
    • Transfers of deposits between FMD providers must be made electronically.
    • 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.

    You should provide your FMD provider with your tax file number (TFN) or Australian business number (ABN). If you don't, any repayments to you will be subject to:

    • the top marginal rate of withholding tax
    • any applicable levies, such as the Medicare levy.

    FMD providers

    An FMD provider must be either an:

    • authorised deposit-taking institution
    • an entity that has a Commonwealth, state or territory guarantee for deposits.

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      Last modified: 08 Nov 2019QC 27154