Income volatility is part of farming. Strong seasons can generate surplus cash, while tougher years can place pressure on working capital and tax outcomes. Farm management deposits (FMDs) are one option available to eligible primary producers to help smooth income across these cycles.
Rather than reacting season by season, FMDs support a more deliberate, long-term approach to cash flow and tax planning. Used appropriately, they can help farming families plan with greater confidence and resilience.
In this guide, we explain what farm management deposits are and how withdrawals are treated on your tax return.
A farm management deposit is a government-supported arrangement that allows eligible primary producers to set aside pre-tax income in stronger years and access it in weaker ones.
When an eligible individual makes a deposit into an approved FMD account, the amount may be deductible in that income year, subject to specific conditions. When the funds are withdrawn, they are generally treated as assessable income in the year of withdrawal.
FMDs are held with approved financial institutions and are governed by clear rules around eligibility, minimum deposit amounts, maximum balances and holding periods. In most cases, deposits must be held for at least 12 months to retain their deductibility, although limited exceptions may apply.
If a deduction was claimed when the deposit was made, a withdrawal from an FMD is generally included as assessable primary production income in the year it is withdrawn.
This income is reported in the relevant section of the tax return and may also interact with income averaging rules, unless the producer has opted out. Where deposits were not deductible, withdrawals of those amounts are not assessable.
Because FMDs can contain both deductible and non-deductible components, accurate record keeping is essential to ensure withdrawals are reported correctly.
Farm management deposits are most effective when they form part of a broader, coordinated strategy rather than a standalone decision.
At Boyce, we support regional families and agribusiness owners with integrated services across business advisory, agri services, tax, private wealth and assurance. By taking a whole-of-business view, we help clients understand how tools like FMDs interact with cash flow, structures and long-term goals.
If you’re considering whether farm management deposits are right for you, speaking with an advisor who understands agriculture and regional businesses can help you make informed, confident decisions for the future. Reach out to us today.
