FMD amendments to cover natural disasters

Primary producers affected by natural disasters will be able to draw on their farm management accounts within 12 months of making deposits without losing tax concessions, under the terms of a draft amendment to the Farm Management Deposit scheme released by the Government yesterday.

The Farm Management Deposit, which was started in 1999, provides an incentive in the form of a tax concession to primary producers to save money earned in the good years and draw it down in years when farm income falls.

Tax payable on primary production income is deferred if the income is deposited in a farm management account. Tax is payable when a withdrawal is made (and it is assumed the tax rate will be lower if the withdrawal is made in a bad year).

The deposit must be held for 12 months. If a withdrawal is made within 12 months it is viewed as not being covered by the FMD scheme. But the 12-month rule is waived if the withdrawal is made in exceptional circumstances or in the case of death, bankruptcy or ceasing to carry on a primary production business.

The amendment extends the waiver to primary producers affected by natural disasters.

Other changes proposed in the draft amendment include a provision to allow primary producers to hold farm management accounts with different financial institutions.

There is a provision that money in a farm management account only becomes unclaimed money if the account has not been operated for seven years, in line with the Banking Act, but only in cases where the financial institution has made reasonable efforts to contact the account holder.

At March 2011, 34,000 farmers held A$2.4 billions in FMDs.