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Farm Management Deposits – Post-implementation Review – Department of the Treasury

In the 2011-12 Budget the then Government announced that it would provide primary producers affected by certain natural disasters earlier access to farm management deposits (FMDs) while retaining concessional tax treatment under the FMD scheme. The then Government also announced:

  • Minor changes to the administration of the FMD scheme. These changes require more timely reporting by FMD providers to the Government (‘the frequency of reporting measure’) and allow eligible primary producers to hold FMDs with more than one FMD provider (‘the multiple providers measure’).
  • A related amendment enabling certain FMDs to be treated as unclaimed moneys (‘unclaimed moneys measure’).

A Regulation Impact Statement was not prepared for the measures which were collectively titled ‘Early access for primary producers suffering natural disasters and improved administration arrangements’. Consequently, a Post-implementation Review was required to commence within one to two years of the implementation of the measures. The FMD Scheme is a financial risk management tool that assists individuals carrying on a primary production business to deal effectively with fluctuations in cash flows resulting from climate and market variability. The FMD Scheme allows eligible individuals carrying on a primary production business to claim a tax deduction for a farm management deposit in the income tax year it was made, provided the deposit is not withdrawn within 12 months. Under the new measures, eligible individuals affected by a natural disaster are allowed to make withdrawals within 12 months and still retain concessional tax treatment. The Post-implementation Review found that the measures have had a minor impact on individuals carrying on a primary production business, and a minor impact on the business sector.  The frequency of reporting, multiple providers and unclaimed moneys measures were found to have had a minor impact on FMD providers while the early access, multiple providers and unclaimed moneys measures were found to have benefited FMD owners and have had no to little compliance cost impact. The Post-Implementation Review prepared by the Department of the Treasury was assessed as adequate by the Office of Best Practice Regulation.