The Australian government is moving to amend the provisions of the legislation to allow farmers with a number of eligible FMDs (held with different or same financial institutions) to consolidate these into a single deposit without facing adverse tax consequences of withdrawing and immediately redepositing FMDs.
In addition, the amendments will increase the amount of taxable off-farm income that an individual can earn in a tax year from $65,000 to $100,000 before they are prevented from accessing the FMD tax concessions which will increase the number of primary producers able to access the FMD Scheme. The government will also be exempting FMDs from the unclaimed moneys provisions.
Rabobank Senior Manager for Deposits Carlos Vieco says these proposed legislative changes to the Farm Management Deposit Scheme – which, if passed, are scheduled to take effect from July 1 – will provide numerous advantages to farmers who will be able to consolidate their deposits into one account, rather than have them managed separately.
And, Vieco says the changes to the scheme – along with a robust financial performance by farmers in a number of states due to bumper seasons last year – are likely to see a strong increase in the amount of funds invested in FMDs this year.
"Basically, in the past, each year when a farmer opens a Farm Management Deposit account, those accounts have been run individually based on their original start dates," Vieco says.
"Soon, taxpayers will be allowed to consolidate multiple FMDs that they might hold with their banking service providers and run those under the one account, without facing adverse tax consequences, providing the FMDs have been held for one year or more and meet appropriate tax deductable status.
"This is a huge benefit to farmers – there is less administration involved and therefore fewer costs to worry about – and from an accounting perspective, it's far simpler and more cost effective to review one account than multiple accounts."
Previously, farmers have only been eligible to take out FMDs if they had a taxable non-primary production income of no more than $65,000 in the year of the deposit and with an investment of no more than $400,000 per farmer.
Farm management deposits are designed to help primary producers smooth out the 'ups and downs' associated with agribusiness.
"These days, farmers are becoming a lot more sophisticated in how they manage their money and their taxation – agricultural enterprise balance sheets have evolved to become quite complex, so anything that can be done to simplify managing these cash flows, and importantly, to extract more value for the farmer, is a good thing," Vieco says.
Following an average to above-average season in some parts of Australia – and, particularly after the excellent harvest in SA and WA – Vieco expects farmers will be well-placed to take advantage of the recent FMDs legislation changes to get the best return on their production. And this is likely to see a big demand for FMDs in 2014.
"As at March 31 this year, Australian farmers had a total of $3.2 billion held in FMDs," Vieco says.
"Looking at industry expectations for interest in FMDs this year, we may see an increase of more than $600 million additional investment in FMDs in June alone. This represents growth of approximately 10 per cent year-on-year."
