Farm management deposits scheme
This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
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The farm management deposits (FMD) scheme is designed to enable primary producers to deal with uneven income flows by making deposits during prosperous years and receiving repayments during less prosperous years.
Subject to certain conditions, deposits are deductible in the year in which they are made. If any deposits that you have previously claimed as a tax deduction are repaid, the repayments are treated as assessable income in the year in which they are made. Amounts that are repaid within 12 months of deposit do not receive concessional treatment unless the repayment is due to an exceptional circumstance or natural disaster (see below).
The basic rules of the scheme are:
- The deposit must be made with an FMD provider.
- The owner of the deposit must be a primary producer when the deposit is made.
- The deposit must be made on behalf of only one person. (Deposits by two or more persons jointly or made on behalf of two or more persons are not recognised as FMDs.)
- Deposits must be made by 30 June to qualify for a deduction in that income year.
- The minimum deposit or repayment is $1,000; the total of all deposits held at any one time cannot exceed $400,000.
- Interest on FMD is assessable in the income year in which it is paid.
- The tax deduction allowed for FMD in any income year is limited to the taxable income derived from a business of primary production in that year.
You can hold FMDs with more than one FMD provider. You will need to account for all of your deposits when completing your income tax return and ensure that you do not exceed the maximum $400,000 deposit cap (for all deposits).
- You cannot claim a deduction for FMD if in the income year
- your taxable non-primary production income for the financial year exceeds $65,000
- you become bankrupt during the year
- before the end of the year you cease to carry on a primary production business for 120 days or more.
- Where a deposit holder dies in the income year, a deduction is not allowable for any deposits they made in that income year.
- FMDs do not have to be 12-month fixed term deposits but can be held in deposits of any term, provided no part of the amount is repaid within 12 months of the date of deposit.
- You can repay part of a deposit within 12 months of making the deposit without losing the benefit of the tax deduction for the remaining amount. This residual amount still qualifies for an FMD deduction, provided it remains in the account for at least 12 months and does not fall below $1,000. A deduction is not allowable for the part of the deposit that is repaid. Where this affects a deduction you claimed in the prior year, you need to request an amendment of your assessment for that income year.
FMDs and exceptional circumstances
You can repay a deposit early and still retain the tax deduction in the income year in which the deposit was made, if at the time of the repayment:
- you operate your primary production business in an area covered by an exceptional circumstances (EC) declaration made by the Minister for Agriculture, Fisheries and Forestry, and
- the deposit was made when the area was not under an EC declaration.
To confirm your EC status, you may obtain an EC certificate from the relevant state authority up to three months after the end of the income year in which the repayment was made. This is to ensure that primary producers can take advantage of the EC concession before the certificate is issued. The amount of the repayment is assessable in the income year in which the repayment is made, and you cannot claim a deduction for any subsequent deposits made in the same income year.
To find out if your area has been declared to be in exceptional circumstances:
- go to the Department of Agriculture, Fisheries and Forestry
- phone the Australian Government Drought and Farmer Assistance Hotline on 13 23 16.
If you need an exceptional circumstances certificate, phone the Australian Government Drought and Farmer Assistance Hotline.
FMDs and natural disasters
You can access your FMDs early without losing their taxation benefit if, on or after 1 July 2010, you:
- received Natural Disaster Relief and Recovery Arrangements (NDRRA) primary producer Category C assistance, within 12 months of making the deposit, and
- withdrew the FMD deposit after having received the recovery assistance.
If you access your FMD in the year after you claimed the deduction, you do not need to lodge an amendment but should include the repayment as assessable income in the current year.
You will need to retain proof that you received the relevant disaster assistance as part of your tax records.
Information on early access to FMDs as a result of natural disaster (including eligibility requirements) see the Department of Agriculture, Fisheries and Forestry.
For 2012 and future years, new labels have been added to the tax return to show deductible deposits and repayments for exceptional circumstances, natural disasters and other repayments.
For more information about how to complete your tax return go to ato.gov.au and search for ‘Farm Management Deposits’.
Farm management deposit accounts are commercial products offered by financial institutions but coordinated by the Australian Government Department of Agriculture, Fisheries and Forestry. For more information on the taxation requirements for the FMD scheme, go to Farm management deposits scheme.
Last modified: 04 Mar 2016QC 39974