Savings and investment strategy

The most straightforward strategy and the easiest to implement is investment of savings in such a manner that they can be used to deal with crisis circumstances. Since each person’s circumstances are different, it is best to seek specific advice from an investment planner. However, in terms of dealing with crisis circumstances it is wise to:

Ensure that at least a suitable portion of your investments are available at relatively short notice;
Ensure that growth and value of the investment is independent of factors than may affect farm operation;
Ensure that your investments are diversified over a number of different sectors of the economy.

For a real world example of one farm family's approach to savings and investment, see the "Knowing the Bank Manager Helps" article in the Good Times Hard Times magazine.

Farm Management Deposits scheme

The Farm Management Deposit scheme is a cash management tool that complements other risk management options. In good years a farmer can deposit income that can then be withdrawn in more difficult years. All deposits made are fully tax deductible, and although withdrawals are taxable, it is likely that because income will be lower, the marginal tax rate will be lower and so overall less tax will be paid. Note that tax benefits only apply if the deposit is held for more than 12 months. Interest is earned on the full deposit at market interest rates. For information on the scheme, go online and CLICK HERE.

This scheme (FMD) replaces the Income Equalisation Deposits (IED) and Farm Management Bonds (FMB) schemes. It continues to be favourably received by primary producers. At 31 March 2001, there were 24,000 holders with total holdings of over $1 billion.

To be eligible for Farm Management Deposits you need to:

Be an individual primary producer with an off-farm taxable income of no more than $50,000 when the farm management deposit is made;
Make a farm management deposit of $1,000 or more;
Have a sum total of all farm management deposits not exceeding $300,000 at any time in any year of income;
If you are using more than one farm management deposit, they must all be with the same financial institution;
Hold the farm management deposit for a minimum period of 12 months in order to gain the taxation benefits of the scheme.

AAA - Farm Management Deposits are available only to individual primary producers who are recognised as such by the Australian Taxation Office and satisfy the eligibility conditions of the scheme. If you require clarification on your status as a primary producer, please contact the Australian Taxation Office on 13 28 66 (or if you are a tax practitioner calling on behalf of your client, please call 13 72 86).

To open an FMD account see an authorised financial institution (banks, building societies and credit unions). Only one account can be opened and you should compare products offered by participating institutions and select one that best suits your needs. Agriculture, Fisheries and Forestry Australia, through CANNEX (Australia), has established comparative tables of FMD products offered by financial institutions throughout Australia – see http://www.cannex.com.au/fmd/fmdindex.htm.

For answers to the following frequently asked questions CLICK HERE.

How do FMDs work?
Are you eligible to use FMDs?
How long must I hold an FMD?
What are the taxation benefits?
Pay As You Go (PAYG) taxation arrangements
The operation of the FMD scheme from 1 July 2000
How do I pay tax on my FMD withdrawals?
What happens if I need to withdraw my FMD within 12 months of deposit?
What happens if I lose my primary producer status?
Will income earned off-farm affect the tax advantages of FMDs?
Hardship certificates
How can I get an FMD?
What are the minimum and maximum amounts I can deposit?
How much interest will I earn?
How do I transfer my FMDs between financial institutions