Farm Finance & Drought Reform Assistance
28 May 2013
The Gillard Government announced in early May 2013 funding of $420 million over two years for a Farm Finance assistance package to aid farmers struggling to manage their debts due to a high Australian dollar and falling land values.
The package, developed in consultation with farmers and peak farming bodies, consists of four measures:
- Concessional loans to help restructure debt and invest in productivity;
- Enhancements to the Farm Management Deposits scheme;
- Extra rural financial counsellors to work directly with farm businesses; and
- Progressing a nationally consistent approach to debt mediation across the country.
Concessional loans for productivity enhancement projects or debt restructuring
The Government says reducing debt repayments in the short-term will provide farmers with the breathing space to continue to run their businesses and support their families.
Under the Farm Finance package, loans of up to $60 million over two years will be made available to the relevant state delivery agency in each state and the Northern Territory for the provision of the concessional loans to farm businesses.
Eligible primary producers will be able to apply for concessional loans of up to $650,000 for a period of up to 20 years. The loans will only be made available to viable farm businesses; applicants will need to demonstrate financial need, participate in a farm business planning exercise, and demonstrate their capacity to meet a debt repayment schedule.
An interest only concessional loan component will be available for five years, and after this time the loan will revert to a market rate and recipients will be required to commence repaying the principal.
Enhancements to the Farm Management Deposits Scheme
In an effort to provide greater flexibility for primary producers to manage and use the Farm Management Deposits Scheme, the non-primary production income threshold will be increased from $65,000 to $100,000.
It is anticipated that this measure will enable more primary producers to access the scheme through encouraging them to diversify their incomes to manage variations in income from year to year.
Funding for more Rural Financial Counsellors
An additional 16 full-time equivalent Rural Financial Counsellors will be deployed across the country to focus on regions and industries experiencing acute debt stress.
This measure is in recognition of the importance of these services in building ongoing financial resilience and capability, particularly for farmers experiencing financial distress.
A nationally consistent approach to farm debt mediation
The Government will work with the banking industry, the agriculture industry and the States and Territories to establish a nationally consistent approach to farm debt mediation.
The Farm Finance Package has been met with a mixed response. In his response to the announcement of the package, Federal Opposition leader Tony Abbott said “farmers don’t want ‘hand-outs’ they want recognition, a fair go, and to be represented by a government who know they are there.”
The increase in funding for the Rural Financial Counselling Service will start from 1 July 2013. Enhancements to the Farm Management Deposits scheme will take effect from 1 July 2014. The concessional loans will become available once the Government garners the cooperation of the State and Territory Governments to administer and deliver this part of the package.
Drought reform - Farm Household Allowance
The Government announced as part of the 2013 Budget, it will provide $99.4 million over four years for a new Farm Household Allowance under the National Drought Program Reform commencing from 1 July 2014.
The Farm Household Allowance (FHA) will be available to eligible farm families in periods of hardship regardless of the source of that hardship. Eligibility for support will be determined through an assessment of the farmer's existing assets, liabilities and income.
The FHA will be paid at the Newstart Allowance rate (currently up to $540/fortnight for singles or $448/fortnight each for couples) and will be available to eligible recipients for a maximum period of three years, with the flexibility to come on and off the payment until the maximum period is reached.
A condition of receiving the FHA will be completion of individually tailored obligations targeted at assisting farmers to better manage their individual situation in the future which could include training or development activities, both on-farm and off-farm, seeking professional advice or succession planning.
This payment will replace the existing Exceptional Circumstances Relief Payment and the Transitional Farm Family Payment from 1 July 2014.
If you would like more information about the Farm Finance package or the Farm Household Allowance please contact your local Boyce Accountant.