Making a deposit
If you're eligible for an FMD, you may claim a deduction for the amount you deposit in that income year.
The deposit amounts must not:
- be more than your taxable primary production income for the income year
- cause your total FMD account balances to be more than $800,000.
You can't claim a deduction for a deposit withdrawn within 12 months unless an exception occurs – see 12 month rule.
If your deposit is a reinvestment or consolidation it will not treated be as a deductible deposit.
Your FMDs may contain both deductible and non-deductible deposits. As the FMD owner, it is your responsibility to keep track of the different amounts in your FMD.
Under the law, the non-deductible components of your deposit must be repaid first.
If you withdraw any part of a deposit within 12 months, you can't claim a tax deduction for that amount, unless any of the following apply:
If you receive a repayment from an FMD in one of these situations, we treat it as assessable income.
If you have already claimed a tax deduction to which you are no longer entitled, you must lodge an amended assessment to cancel the deduction.
Example 2: Deposit partly repaid within 12 months
On 1 November 2017, Angela made an $8,000 deposit into an FMD account.
In the income year that ended 30 June 2018, Angela claimed an FMD deduction of $8,000.
On 1 October 2018, Angela withdrew $5,000 from her FMD account. Because this amount was withdrawn within 12 months and there were no exceptional circumstances, the $5,000 she withdrew does not qualify as an FMD deduction.
Angela must lodge an amendment to her 2018 income tax return to reduce her FMD deduction claim by $5,000.
End of example
Consolidating multiple deposits
You may consolidate two or more FMDs into a single FMD.
The withdrawals involved in consolidating the accounts will not be counted as assessable income if the following conditions are met:
- The original FMDs only contain amounts for which deductions have been claimed.
- The original FMDs are immediately reinvested into a single FMD. This can be with the same FMD provider or a new FMD provider.
- After merging, the consolidated FMD only contains amounts that you have
- held for at least 12 months
- claimed a tax deduction for.
You can't claim a deduction when you consolidate deposits.
Consolidated deposits are considered to have been made on the same day as the most recent of the original deposits.