Primary Producers! Are you aware of the recent changes to Farm Management Deposits (FMD’s)?

As primary producers, whose days are spent in a paddock, amongst livestock, atop a tractor or repairing machinery, the benefits of Farm Management Deposits (FMDs) are already apparent to you (at least that’s what we assume).

In a volatile industry such as agriculture, where bad years, as well as the good, are inevitable, the scheme is the Australian Government’s way of ensuring the nation’s primary producers can better manage their finances over a long period of time.

As of July 1 2016, based on the requests and recommendations of primary producers, the government have made several significant and beneficial changes to the FMDs which are important to be aware of.

Doubling the cap on FMD’s to $800,000

 The government are making it easier for primary producers to build up cash reserves and prepare for fluctuating incomes throughout the seasons, by allowing each eligible primary producer to retain up to $800,000 in Farm Management Deposits.

This is double what the schemes used to allow, and has been increased to ensure strengthened financial stability for sole traders, partners in a partnership, and primary production trust beneficiaries all with interests on the land.

Setting aside these pre-tax funds means you will be able to lessen a large tax burden, and mitigate financial risk during lower or negative cash flow/income years.

Early trigger release during times of drought

While the government once put a withdrawal ban on FMD deposits until 12 months had passed, those deposits can now be accessed within the first 12 months without losing their tax benefits, should the primary producer find themselves drought-stricken.

Please contact your accountant for  eligibility requirements when it comes to being classified as ‘drought stricken’. As a guide only, this early access to FMDs is determined by the level to which significant damage has been caused by lack of rain, measured using the FMD rainfall analyser, available here note this is only a guide and  there are other implications also.

You can now use your FMD to offset interest on your farm business core debt

Taking out a loan when running a farm business is almost unavoidable. However, there are now ways to offset your FMD against the cost of your farm business borrowings.The advantage of applying this offset effect could be significant.

We’d love to provide you an example of how this may positively impact you, however it is still early days and specific product details aren’t fully available from financial institutions as yet. We do know that to be eligible for this most recent change, primary producers simply need to hold their FMD and their loan with the same financial institution.

While not all financial institutions may offer this advantage, primary producers should speak to their bank for information of the products available to them and give us a call to discuss their options. We hope to provide further updates at a later stage.

So what’s your next move?

It is important to take notice of and understand these recent and significant changes for primary producers. For further information, see

FMD are just one tool that we use to help farmers manage their finances and should you require further clarification of any of these changes, please speak to us here at Catalyst Accountants.

As always, we encourage you gain specific advice about the implications of any changes specific to your situation. If you are confused, unsure or have questions regarding how Farm Management Deposits can work for you then speak to the team at <a href=”http://www.catalystaccountants go” target=”_blank”>Catalyst Accountants.