Farm management deposit changes fail to inspire

Major changes to the farm management deposit scheme three years ago have made little difference to how farmers use it, a Government audit has found.

MAJOR changes to the farm management deposit scheme three years ago have made little difference to how farmers use it, a Government audit has found.

The Australian National Audit Office found significant changes in 2016, which doubled the amount farmers were allowed to contribute to FMDs every year and also allowed the deposits to be used to offset loans and other farm debts, have not been well supported.

The audit found the changes, announced by former Deputy Prime Minister Barnaby Joyce, went against departmental advice suggesting there was no case for changing the scheme.

The FMD scheme was introduced in 1999 to allow farmers to set aside pre-tax income from their primary production activities during years of high income. Income could then be drawn in drought years, enabling primary producers to defer — and potentially reduce — their income tax liability.

The ANAO audit found FMD account balances increased steadily over the past decade and more sharply in recent years.

It found a “distinct pattern” of deposits at the end of the financial year followed by a drawing down of deposits at the beginning of the following financial year.

In June 2016, $5 billion was held in FMDs, rising to $6.6 billion in June 2018, with about 45,000 FMD holders participating. Only individuals are able to hold FMD accounts, not trusts or companies.

Opposition agriculture spokesman Joel Fitzgibbon said the audit revealed the scheme may be being used by farmers more for tax minimisation purposes rather than drought preparedness.

Minister for Drought and Rural Finance David Littleproud said he would respond to the recommendations after consulting with Treasurer Josh Frydenberg.