Changes to the FMD Scheme from 1 July 2014
Increasing the non-primary production income threshold from $65,000 to $100,000
The taxable non-primary production income threshold increased to $100,000 on 1 July 2014. The increase allows more primary producers to access the Farm Management Deposits (FMD) Scheme, including those who diversify their income to help manage the risk associated with their primary production business.
The increase means that a person who receives income from non-primary production sources of up to $100,000 in a financial year will be able to deposit primary production income into an FMD and claim a corresponding tax deduction.
Under the previous arrangements, a person with non-primary production income of more than $65,000 in a financial year was unable to make a deposit into an FMD and claim it as a deduction in that financial year.
Allowing primary producers to consolidate their existing FMD accounts
From 1 July 2014, primary producers with more than one FMD account are able to consolidate those FMD accounts held for 12 months or longer, without affecting their ability to access the FMDs when needed.
The transfer of FMDs into a consolidated FMD account (where FMDs are withdrawn and then immediately deposited into a consolidated FMD account) does not count as either a withdrawal or deposit for the purposes of the FMD legislation.
The deposit date for the new consolidated FMD account comes from the most recent FMD included in that consolidated account (see Example 1).
- Example 1: John has three FMD accounts – $20,000 deposited on 13 June 2010, $7500 deposited on 7 June 2011, and $11,300 deposited on 28 May 2012. On 5 July 2014, John decides to consolidate his FMDs into a single account totalling $38,800, which has a deposit date of 28 May 2012.
Any FMD accounts that include amounts for which the holder has not claimed a tax deduction (undeducted amounts) cannot be transferred into a consolidated FMD account (see Example 2).
- Example 2: Mary also has three FMD accounts – $4000 deposited on 6 May 2009, $2550 deposited on 2 June 2011, and $9700 deposited on 29 June 2012, for which Mary could only claim a tax deduction of $7000 because her primary production earnings in that year only totalled $7000.
- On 30 July 2014, Mary decides to consolidate her FMDs into a single account. Mary can transfer the $4000 FMD and the $2550 FMD into a consolidated account totalling $6550 with a deposit date of 2 June 2011. Mary cannot transfer the $9700 FMD account into the consolidated account as it includes an undeducted amount of $2700. Mary would need to withdraw the $2700 undeducted amount first before consolidating the remaining $7000. The deposit date of the consolidated account would then be 29 June 2012.
Exemption of FMDs from the unclaimed moneys provision
FMDs were made exempt from the unclaimed moneys provision contained in the Banking Act 1959 on 30 May 2014.
Where an account ceases to be an FMD, for example because the holder dies, becomes bankrupt or ceases to be a primary producer, the unclaimed moneys provisions will apply.
These enhancements were enacted through the Tax Laws Amendment (2014 Measures No.1) Act 2014 which is available on the ComLaw website.
Source: All information above is provided with permission from the Australian Department of Agriculture.