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24
May
  • Posted By : Administrative
  • Category: General Tax Topic
  • Comments: 0

WHAT IS FARM MANAGEMENT DEPOSITS SCHEME (FDMS)? WHAT ARE THE BASIC RULES AND ELIGIBILITY CRITERIA FOR SUCH SCHEME?

Farm management deposits (FMDs) are plans that are designed to help primary producers to better manage their uncertain cash flows and build cash reserves for future uncertainties. For example, low income, natural disasters, climate change, etc. This plan also supplements other risk-management plans available to primary producers, such as developing fodder and water reserves, financial planning and diversifying production systems.
Basic rules apply to farm management deposits (FMD):

  • You must make the deposit with an FMD provider; 
  • You must be an individual, conducting a primary production business (including through partnerships and trusts) when you make the deposit; 
  • The deposit must be on behalf of only one individual; 
  • Deposits are deductible in the income year in which you make them, the minimum deposit or repayment is $1,000; 
  • The maximum of all FMD deposits that you hold at any one time is $400,000 (before 1 July 2016) and $800,000 (from 1 July 2016);
  • Interest on deposits is assessable in the income year in which it is paid;
  • The deduction allowable in any income year is limited to the taxable income derived from a business of primary production in that year;
  • You can hold FMDs with more than one FMD provider;
  • You can't claim a deduction;
  1. For any amount that exceeds the maximum $400,000 deposit cap;
  • If your taxable non-primary production income is more than $100,000; Trustees can only make deposits on behalf of a beneficiary presently entitled to a share of the income of the trust estate who is under a legal disability, for example a minor; 
  • Deposits by two or more people jointly or made on behalf of two or more people are not recognised as FMDs.

To be eligible for the farm management deposits (FMD) scheme, you must be:

  • Carrying on a primary production business at the time you make a deposit;
  • Be an individual (including as a partner in a partnership or beneficiary of a trust);
  • Have taxable non-primary production income not exceeding $100,000 or $65,000 prior to 1 July 2014.

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