The Farm Management Deposits scheme is a government scheme that allows eligible farmers and primary producers to deal more effectively with fluctuations in cash flows. It helps increase their self-reliance by helping them manage financial risk and business costs in low-income years by building up cash reserves in higher income years. The scheme effectively helps primary producers to smooth their incomes and manage their financial risks over agricultural cycles.
Income deposited into a FMD account is tax deductible in the year the deposit is made and it becomes taxable income in the year in which it is withdrawn. This provides eligible primary producers with the ability to set aside pre-tax income from primary production in years of high income, which they can draw on in years of low income.
Special FMD accounts at banks are used to manage the scheme and these accounts usually receive higher rates of interest than regular term deposits as shown in the table to the right.
Growth in FMD scheme
The FMD scheme has grown in popularity but might also be seen as a proxy for how well the rural sector is performing. Savings in the latest data to 30 June, 2015 are $4.6bn and this was held by 48,487 producers. This has increased from $4.1bn in 2014, $3.7bn in 2013 and $3.5bn in 2012. The chart below shows a breakdown by year and by state.
Regular term Deposit vs Farm Deposit Scheme
| Term | Regular term deposit rate | FMD special rate |
| 6m | 2.35% | 2.85% |
| 12m | 2.40% | 3.00% |
| 24m | 2.65% | 3.05% |
*for deposits b/n $100k and $400k. Source:NAB
a March 2009 quarter figures have been adjusted to reduce duplication of holders who have more than one account and attribute them to different commodities.
b Figures for the states in the March 2007 quarter are showing an increase, while the total value of deposits have decreased. This is due to corrections made to previously incomplete state/industry data from some Authorised Deposit–taking Institutions.
c June 2006 data does not include $161 million that could not be allocated to any state.
d The fall in ACT & NT FMD holdings in December 2004 resulted from a particular financial institution correcting a previous categorisation error in its reporting systems.