Press Release

Important Changes to FMD Scheme from 1 July 2016

2016-05-19

The PGA has received the following information on important changes to the Farm Management Deposits (FMD) Scheme which will commence on 1 July 2016

The Tax and Superannuation Laws Amendment (2016 Measures No. 1) Act 2016 has been passed by Parliament, meaning the below changes will commence on 1 July 2016 :

•         doubling of the cap on deposits from $400 000 to $800 000
•         re-establishment of an early access trigger during times of drought
•         allowing FMDs to be used to offset the interest on primary production business debt.

Please be aware, the increase in the cap on deposits and the early access trigger during drought will be administered through the annual tax returns of FMD holders. The Australian Taxation Office continues to monitor the FMD Scheme to ensure appropriate use by FMD holders. From 1 July 2016, this will include compliance with the increased cap on deposits and the drought early access rules.

A tool which assists FMD holders in determining their eligibility to the drought early access provision is being developed and will be available from 1 July 2016. A link to this tool will be provided on the Department of Agriculture and Water Resources’ FMD webpage at www.agriculture.gov.au/ag-farm-food/drought/assistance/fmd.

The legislation allows for FMDs to be used to offset the cost of interest on primary production debt. It is not compulsory for financial institutions to offer an FMD loan offset product and it will be up to each financial institution to determine if it will offer such a product and how it will be operated. Interested FMD holders should contact their financial institution to confirm if they will be offering FMD loan offset accounts. It is important to note that a primary producer would need to hold both their loan(s) and FMD(s) with the one financial institution to take advantage of this measure.

While primary producers may obtain financial benefits by using their FMDs to offset their farm business debt, they should also be aware that it may have wider taxation implications. For example, primary producers who opt to hold an FMD loan offset account may find the level of tax deduction that they can claim against their interest expenses on farm business loans is reduced.

More information about these changes, and the FMD Scheme generally, is available on the website at www.agriculture.gov.au/ag-farm-food/drought/assistance/fmd.

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