Farm management deposit scheme beefed up
The maximum amount that can be held in a farm management deposit account will increase from A$400,000 to $800,000 on July 1, under government changes to the tax treatment of the scheme.Farm management deposits, which have been around since 1999, are designed to allow primary producers to smooth out their cash flows. They can set aside pre-tax income from primary production in years of high income.Deposits must be held for a minimum of 12 months and the income is taxable when money is withdrawn (it is assumed the tax rate will be lower if the money is withdrawn in a bad year).Other changes to the scheme to take effect in the new financial year include a waiver that allows primary producers affected by severe drought to withdraw an amount that has been held in a deposit for less than 12 months without affecting the income tax treatment of the amount.And amounts held in farm management deposits will be available to offset a debt. This means that the amount on deposit will reduce the principal owing on a linked loan for the purpose of calculating interest.The debt must relate to the primary producer's business.