Nationally, farmers have been using Farm Management Deposits (FMDs) at record rates – the biggest month for deposits each year has traditionally been June, as farmers look to take advantage of tax benefits before financial year end.

NAB Agribusiness is encouraging farmers to consider the benefits of FMDs as an effective way to manage cashflow through good seasons, and more challenging ones.

NAB’s General Manager of Agribusiness, Khan Horne, says last June FMD deposits reached a new high when the total exceeded $3.5 billion for the first time. “Farmers are adept at managing income fluctuations, and FMDs are increasingly being used for exactly this purpose,” said Mr Horne.

“By putting excess cash away in good times, farmers are able to bring that cash back into the business when it’s needed.

“Deposits are deductible in the income year in which they’re made, and FMDs have to be in place for 12 months to receive the full tax benefits.

“Farmers should consider making regular, smaller deposits if they have excess cashflow through the year to provide more opportunities to make withdrawals when they need the cash.

“This in turn will reduce farm financing costs by reducing the pressure on overdrafts and other short term loans.

“If you already have money put away in FMDs, you could consider re-distributing funds into superannuation. This is a valuable option for those who have had some good seasons and may have reached the maximum limit for FMDs of $400,000.

“You can then continue to utilise FMDs as a short-term tax and cashflow funding tool as cashflow surpluses and operating profits permit.”

The Federal Government recently announced changes to the FMD scheme, increasing the non-primary production income threshold from $65,000 to $100,000. This would enable more farmers to utilise FMDs. The changes also allow the consolidation of existing eligible FMD accounts, and are anticipated to take effect from 1 July 2014.

“NAB has a team of specialist Agribusiness Financial Planners that work closely with Agribusiness Bankers who can help you review your financial situation and forecast for the year ahead so you can make the most tax effective decisions,” said Mr Horne.

Important Note:
Any advice in this editorial has been prepared without taking into account your objectives, financial situation and needs. Before acting on this advice, you should consider its appropriateness to you.

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