Farmer savings climb towards $5 billion

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 farmers, more than $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 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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