Farm management deposits is an option available for primary producers to help to equalise uneven income flows.
To be considered eligible to utilise this option the following must be applicable:
- Be operating the primary production business in your own name, in a partnership or you are a beneficiary of a trust which operates a primary production business.
- Non-primary production is less than $100,000 taxable income in the year that the farm management deposit is made.
- Currently hold less than $800,000 in Farm Management Deposits.
There are restrictions on the types of accounts that can be used at a bank as the provider will need to be registered with the Australian Government Department of Agriculture and Water Resources.
If eligible to utilise the Farm Management Deposit scheme, moneys deposited into an eligible account are considered a tax deduction in the year they are made and thus will reduce your taxable income. The only condition to this, is that the money must remain in a farm management deposit account for 12 months for this to be accepted as a tax deduction. If the funds are withdrawn before 12 months this will require your tax return to be amended, and penalties and interest may apply from the Australian Taxation Office and your financial institution.
In the year that the funds are withdrawn from the farm management deposit, they are recorded as assessable income in that years tax return.
Any interest earnt from the term deposit is required to be paid to the owner of the account and cannot be added into the term deposit and reinvested. The year that the interest is received by the tax payer it is declared in their tax return as interest received.
If the Farm Management Deposit scheme is something that you could benefit from please contact PJT and we will be able to assist you with strategies to maximise the use of this this scheme.