Farm Management Deposits are increasingly being used by primary producers to manage their cash flow through both good and challenging seasons, latest statistics show.

The latest figures from the Department of Agriculture show the number of FMD accounts in March this year was almost 40,000, with the total amount deposited sitting at just over $3.2billion. FMD usage has been trending upwards year-on-year.

National Australia Bank general manager of agribusiness, Khan Horne said primary producers were becoming increasingly aware of the benefits of FMDs.

“By putting away excess funds in good times, farmers are able to bring that cash back into the business when times are a little tougher.  This has important tax advantages as it allows farmers to manage the income fluctuations that are common in farming,” Mr Horne said.

“FMDs are tax deductible in the year they are made, which in the past has seen a big spike in accounts being set up in June. However, it’s important to remember that you can reap the benefits of FMDs year-round and deposits have to be in place for a full 12 months to receive the full tax benefits."

Mr Horne said making regular, smaller deposits when there is an excess in cash flow could help ensure there is a pool of money to withdraw from down the track when it may be needed.

“The money saved in FMDs can reduce farm financing costs by easing the pressure on overdrafts and other short term loans,” he said.

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

“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,” Mr Horne said.

“This will allow farmers to use continue to utilise FMDs as a short-term tax and cashflow funding tool as surpluses and operating profits permit.

“Whatever you decide, it’s always a good idea to get expert financial advice that takes into consideration your current situation and plans for the future, as well as how various options will impact on cashflow,” Mr Horne said.

• Click here to access the latest statistics on FMDs from the Department of Agriculture website.