Farmer savings climb towards $5 billion

30 Jul, 2015 05:16 AM
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The rise suggests that 2014-15 was a lucrative year for at least some Australian farmers

AUSTRALIAN farmers have more money stashed away in special savings accounts designed exclusively for them - over $4.6 billion - than ever before.

The cash reserves are an important buffer against drought, failed crops and other bad times. They are also a crucial savings base for farmers with plans to expand or invest in new infrastructure, machinery or stock.

The June figure of $4.6 billion, held between 48,487 farmers, is almost $500 million higher than the same time 12 months ago.

The rise during the 2014-15 financial year was easily the biggest annual surge in aggregate value of Farm Management Deposits (FMDs) over the past decade.

In the 2000s, the value of such FMDs was often static from year to year, and sometimes went backwards.

The rise suggests that 2014-15 was a lucrative year for at least some Australian farmers, particularly for those able to capitalise on a surge in commodity prices.

Cattle prices have repeatedly smashed records over the past six months, while wool prices surged unexpectedly to a four-year high in June.

Lamb and cotton prices, major planks of agriculture in eastern Australia, have also been strong.

Federal Agriculture Minister Barnaby Joyce welcomed the record figures. The FMD accounts were an important tool for Australian farmers, he said.

"FMDs allow farmers to put pre-tax income aside in good years to build up cash reserves for use in low-income years," he said.

"Having money set aside in an FMD to draw on in lean years can help farmers bring their businesses back to profitability when conditions improve," he said.

Changes to the scheme, which come into effect in July next year, could lure more money into FMDs.

The changes include an increase in the cap on funds allowed to be held in an individual account, which will double to $800,000, and legislative changes that will allow FMD account funds to be used to offset a loan.

Brent Finlay, president of the National Farmers' Federation, said farm management deposits were "such an important instrument" for farmers.

"They're putting it away for the day when it doesn't rain ... or a day when they need access to funds, whether that's changing their production systems or modifying production systems," he said. "So it's all the things that farmers need large amounts of capital for, it could be for when times are tough.

"What we're trying to do in Australia is build resilience into our farm businesses, so here is a really important tool," he said.

The FMD scheme was introduced in 1999 by the then Howard government.

Under the scheme's rules, farmers can bank pre-tax farm income in seasons when returns are strong. These savings can be called upon in years when earnings are weaker.

Income deposited into one of these accounts is tax deductible in the financial year the deposit is made; it is treated as taxable income in the financial year it is pulled out.

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READER COMMENTS

Tj
30/07/2015 6:27:06 AM

Would think the drought would be a major fact in the rise in FMDs in Qld, with having to destock.
Jacky
30/07/2015 7:02:50 AM

Just shows that drought subsidies should be gotten rid of once and for all.
Rob Moore
30/07/2015 11:25:38 AM

This does amaze me-I would like a breakdown of the industries per deposit total amount. Is this city street hobby farmers parking funds. I could easily see meat processing families &companies with stock and land to allow entry to the scheme -being able to max out the limit.Also Farmers with a good crop maybe. I have travelled far and wide and I don't see many affulent areas west of the divide. More info PLEASE as this is a headline with very little detail- designed to shame good (though slim pickings )operators like myself!?Posted our first loss in well over a decade in 14-15.and I'm stocked
Invey
30/07/2015 11:40:11 AM

Jacky they already have. I don't know anyone that has received a cent in the last 5 years. While your advocating getting rid of support for those that actually do something for this country, why stop there. What about the pension, baby bonus, child care benefit, child payment, single parent payment and the list could go on and on. There is something badly wrong with this country when a single mother of 4 can get over $40,000 tax free for doing nothing every year. The vast majority of farmers don't have any money in FMD's.
Beth
30/07/2015 5:46:51 PM

Invey - how much do you think a single mother with 4 young children should get ?
Qlander
31/07/2015 8:09:05 AM

Tj; Yes, but I hope people are aware of the sting in the tail of FMDs. Destock in the face of and put $300k in an FMD. When it rains restock, and withdraw FMD to pay for it. Bingo! Your personal taxable income is now $300k for the year...right when you have no cash flow, OUCH!
Qlander
31/07/2015 8:15:14 AM

Raising 4 kids is not 'doing nothing'. The key question is are they future tax payers, or future welfare recipients? What single mothers need more then anything, is the physical support and mentoring required, to make sure they're raising tax payers.
hayseed
31/07/2015 8:57:51 AM

I'm with Rob Moore, I'd like to see a break down of It as well.. However a quick back of the envelope division works out to be an average Deposit of $94,870...
Jacky
31/07/2015 9:15:54 AM

"The vast majority of farmers don't have any money in FMD's" - The article quotes 48,487 farmers - I think the stats say there are 100 000 'farmers'..
Qlander
31/07/2015 11:58:12 AM

If there are 100,000 farmers then 48.5% of farmers, are holding cash reserves equivalent to 2- 4 mths operating costs - Not much of a buffer.
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