|Primary producers often have years of high income and low income caused by factors such as drought, flood, fluctuating livestock and grain prices etc. Farm management deposits (FMD) are a system by which Primary Producers can manage the risks associated with inconsistent cash flows.
The FMD system is in place to smooth out taxable income from year to year. If in a year of high income, a sum of money is placed into a FMD account then it is a deductible expense in that tax year. When the money is withdrawn from the FMD account it is treated as assessable income.
There are eligibility criteria that need to be met before you can utilise a FMD. Some of the criteria includes:
· Must be a primary producer
· Must use a FMD provider
· Minimum deposit of $1,000
· Minimum withdrawal of $1,000
· The maximum deposit amount for each primary producer from 1 July 2016 is $800,000.
· Must hold deposit for 12 months to claim a deduction (Exceptions apply)
FMD accounts can now also be used as offset accounts against business debt. This will decrease the business interest cost.
Should you wish to discuss further please feel free to contact Andrew Marshall or Janine Orpwood on 5427 8100 for an initial consultation.