This report assesses the effectiveness of the Farm Management Deposits (FMD) Scheme to evaluate if it is meeting its policy objectives and supporting farmers’ ability to prepare for challenges such as climate variability and market fluctuations by managing their financial risk.
In conducting this assessment, the National Rural Advisory Council (NRAC) considered a range of elements and issues, including the appropriateness of the $400 000 FMD deposit cap and the $65 000 non-primary production income threshold. NRAC also considered ways to increase participation in the scheme, including whether to expand the scheme to include farm business structures currently not eligible for inclusion.
NRAC’s assessment was informed by consultation with a wide range of stakeholders. In July and August 2012, NRAC consulted with the accounting sector, agribusinesses, the banking sector, industry representatives, national and state farming organisations and peak industry bodies. They also received written submissions from several stakeholders. Consultations were also held with Australian Government and state and territory government officials. In addition, NRAC reviewed available literature and drew on past assessments of the scheme, as well as data from the Australian Bureau of Agricultural and Resource Economics and Sciences.
A summary of NRAC’s recommendations include:
- The Australian Government should increase the non-primary production threshold to $100 000 as soon as possible and phase it out by 2020. NRAC does not consider that the threshold should be maintained as it limits the ability of primary producers to diversify their income as a risk management tool.
- The current $400 000 cap on deposits should be maintained, as NRAC does not consider it to be a barrier to participation in the scheme at this time. The Australian Government should undertake a review of the FMD cap every three years. Regular review of the cap will ensure that it reflects the evolving nature of farm enterprises and maintains its value in real terms over time.
- The Australian Government should not extend the FMD Scheme to trusts or companies.
- The Australian Government should retain the exemption that allows a primary producer to access their FMD in times of a natural disaster.
- The Australian Government should make provision in the legislation governing the scheme to allow funds held in multiple FMD accounts, which have been held for the minimum of 12 months, to be consolidated into a single account in the name of the same FMD-holder.
- DAFF should continue to work with accounting peak bodies, financial institutions and farm organisations to raise the farm sector’s understanding of the scheme, particularly its role as a risk management tool.
- DAFF should continue to work with other Australian Government departments, particularly the Australian Taxation Office, to improve the collection, reporting and analysis of FMD’s Scheme data.