Littleproud vows ‘no intention’ to remove farm management deposit scheme amid federal review

Aussie farmers are costing taxpayers at least $215 million a year via this drought tool that’s now undergoing a federal review.

The Federal Government is taking a closer look at its farm management deposit scheme.

AGRICULTURE Minister David Littleproud has assured farmers the tax-saving farm management deposit scheme is not going anywhere, despite coming under federal review.

The Government has opened consultation on the program – which allows farmers to put aside up to $800,000 in pre-tax income for use in low-income years – as part of its wider examination of drought tools.

There are about 49,000 FMDs accounts, holding about $5.3 billion – and costing taxpayers about $215 million in lost tax revenue.

The Department of Agriculture, Water and Environment will consider if FMDs help farmers become more financially self-reliant in lean years, or if it is just being used for tax purposes.

Mr Littleproud, however, has already vowed FMDs would stay, describing them as “an important tool” for drought management.

“The (National Farmers’ Federation) tells us this is one of the key drought measures they support … so we don’t intend to take this away,” he told ABC Radio.

“We want to know how does this fit as part of the overall drought response and how do we do that better.”

FMDs are a way for farmers to defer pre-tax income in goods years and draw down on it in bad seasons.

Farmers generally reassess their income in June to decide whether to deposit funds in FMDs before the end of the financial year, and have mostly been used by grain farmers.

Accounts hit a record $6.76 billion in June 2019, before dropping to $6.49 billion last June; the Department said while it was not possible to give exact costings, it estimated FMDs provided $215 million in tax relief to farmers in 2019-20.

The FMD balance has decreased 6 per cent in the past year, dropping to $5.3 billion by January 31 this year.

Mr Littleproud said this was due to farmers drawing down on their FMDs as drought conditions recovered and, “that’s a good thing, that’s what they’re there for”.

The review will also include examination of what parts of the program are working well and what needs to be improved, and implications of the program for other financial schemes geared toward farmers, such as farm household allowance or concessional loans.

The review will not consider expanding the program to non-primary production businesses, nor increasing the current $800,000 threshold.

Farmers can have their say on the scheme until April 26.