Farm Management Deposit (FMD) is a scheme that enables Australian farmers to set aside funds in good years for use in leaner years. The FMD scheme was introduced in 1999, and since then it has become a key tool for many farmers to manage the volatility of their income. In this article, we will discuss the benefits of the FMD scheme and how it works.
How the FMD Scheme Works The FMD scheme is designed to help farmers manage their income by allowing them to set aside funds in good years when their income is higher than average. The funds are held in a special account, known as an FMD account, and are taxed at a lower rate than regular income. Farmers can then withdraw the funds in leaner years, when their income is lower than average, to help cover their expenses.
The FMD scheme is administered by the Australian Taxation Office (ATO) and has certain eligibility criteria that must be met. To be eligible, farmers must earn at least 50% of their assessable income from primary production activities in the current financial year or in 2 out of the past 5 financial years. They must also have carried on a primary production business in Australia for at least 3 of the past 5 financial years.
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Benefits of the FMD Scheme The FMD scheme offers several benefits to farmers. Firstly, it helps to even out their income by allowing them to set aside funds in good years and withdraw them in leaner years. This helps to reduce the volatility of their income and makes it easier to manage their expenses.
Secondly, the FMD scheme provides tax benefits. Funds held in an FMD account are taxed at a lower rate than regular income. This means that farmers can save money on tax by using the scheme.
Finally, the FMD scheme is flexible. Farmers can choose how much they want to deposit into their FMD account each year, up to a maximum of $800,000. They can also choose when they want to withdraw the funds, as long as it is during a qualifying period.
FMD Scheme Activity in 2022 According to a recent report by Farmonline, FMD scheme activity increased to a record $6.7 billion in 2022. This was a significant increase from the previous year, which saw FMD scheme activity at $6.1 billion.
The report suggests that the increase in FMD scheme activity can be attributed to the good seasonal conditions in many parts of Australia in 2022. This led to higher than average income for many farmers, which in turn led to more funds being deposited into FMD accounts.
The FMD scheme is a key tool for Australian farmers to manage the volatility of their income. It allows them to set aside funds in good years and withdraw them in leaner years, provides tax benefits, and is flexible. The increase in FMD scheme activity in 2022 is a testament to its popularity and effectiveness.
Keywords: Farm Management Deposit scheme, Australian farmers, income management, ATO, tax benefits, flexibility, FMD activity in 2022.
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