Do you operate your business as a primary producer?
Then these changes may apply to you!
From 1 July 2016, the following changes became effective to Farm Management Deposits (FMD’s):
Total deposit limits for individuals holding an FMD is now $800,000
As a primary producer, up to 30 June 2016 the balance of your FMD’s held with multiple banks and credit unions was limited to $400,000. This amount has now been doubled, so that individually you can hold up to $800,000 from 1 July 2016.
Reintroduction of early access to funds held in FMD’s under drought provisions
Primary producers affected by drought will be able to withdraw funds from your FMD’s within 12 months, on or after 1 July 2016.
If you made a FMD deposit in the previous financial year and held it for a minimum of six months, you will be able to keep the amount claimed as a taxable deduction providing you are able to demonstrate that an area of your property used for farming purposes has been affected by a shortage in rainfall for six consecutive months.
In order to be eligible, the rainfall must have been within the lowest 5% of recorded rainfall for your property during that six month period. To assist you with determining your eligibility there is an online tool, FMD Rainfall Analyser can be accessed from the Bereau of Meterology website (www.bom.gov.au/climate/ada/fmd.shtm). Remember if you happen to utilise this tool, then please print a copy of the report that demonstrates your eligibility, under these provisions.
Before you make any withdrawals from your FMD’s, check your eligibility or contact our office. If you make an early withdrawal and you are not eligible under these provisions, then your original deduction for the deposit may no longer be allowable.
FMD accounts can now be used to offset the interest costs of primary production business loans
Financial institutions, should they wish to, now have the ability to offer FMD offset accounts to primary producers, as an offset against borrowings relating to your primary production business.
From 1 July 2016, the following needs to be noted when taking up the offset account availability:
- As a primary producer, you will need to hold your loan and FMD with the same financial institution to take advantage of this option;
- If you are wishing to utilise the offset option, check with your bank before making your FMD deposit to ensure they offer this facility or is intending on providing it to primary producers; and
- Be aware that when using this option, you may have wider tax implications. As you are utilising an offset account to reduce interest payable on borrowings, you will be also reducing the value of any interest expense claimable on farm business loans.
For any further information or assistance relating to these changes, please contact our office.