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A Farm Management Deposit (FMD) is a government-backed scheme that allows primary producers to set aside pre-tax income in good years and draw it down in bad years. The key benefit: the deposit is tax-deductible in the year you make it, and the withdrawal is assessable income in
The maximum total across all FMD accounts is $800,000. The minimum per account is $1,000. You can have multiple FMD accounts with different institutions and different terms, as long as the total doesn't exceed $800,000.
Some banks offer FMD-linked offset arrangements where your FMD balance reduces interest charged on your farm loan. Not all providers offer this, so ask specifically. This strategy provides both the tax deduction on the deposit and ongoing interest savings on your mortgage - a powerful double benefit for primary producers.
If you withdraw within 12 months of making the deposit, you lose the tax deduction. The deduction is reversed, and the amount is added back to your assessable income for the year the deposit was originally made. After 12 months, you can withdraw at any time - the withdrawal becomes assessable income in the year of withdrawal.
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