Working harder isn’t the only way to make your farm more profitable. Did you know a new regulation now allows you to use Farm Management Deposits to offset eligible term loans?
Deirdre Fleming from Sinnotts Accountants said the time was right for local farmers to get some advice about the new FMD Offsets, which could save them thousands of dollars.
“After you’ve completed your third-quarter BAS statement is a great time to start tax planning for the end of the financial year and the FMD Offsets are certainly something we’ll be talking to our primary producer clients about,” she said.
Farm Management Deposits are much like a fixed term deposit, but are designed specifically for farmers to minimise tax and even out erratic income flows.
“On a good year, farmers can put some money away in a FMD for 12 months to help them get through a tougher year,” Mrs Fleming said.
“Now, instead of just reducing farmers’ taxable income and reducing their exposure to natural disasters, climate and market variability, the capital held in a FMD Offset Account can also be used to reduce the amount of interest paid on an existing term loan.”
Mrs Fleming said at six per cent per annum, the interest payable on an $500,000 term loan was $2465.75 each month. However, if $100,000 was placed in a FMD Offset Account, that would mean interest was only payable on $400,000 – reducing the monthly interest by $493.15 per month to $1972.60.
“Over 12 months that’s a saving of nearly $6000 which is a significant saving for any business and that’s on top of the existing tax benefits you get from the FMD,” she said.
“There are some key requirements and eligibility that farmers need to meet in order to qualify, but Sinnotts Accountants can do that assessment work for you.
“The important thing is having an eligible term loan and believing there’s an opportunity this financial year to put some money away in an FMD for the next 12 months.”
Mrs Fleming encouraged all farmers to get advice from an accountant, the ATO or their financial adviser before contacting their bank or finance provider.
For further information please call Sinnotts Accountants on 03 5557 3337.