More options for farmers to save | My Machinery
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More options for farmers to save

New farm management deposit (FMD) rules have opened up wider savings options for farmers setting money aside in these tax-friendly accounts for use in tougher years down the track. Primary producers can now put their funds into multiple FMD accounts, and with different banks. The past 24 months of much-improved seasonal conditions and relatively firm commodity markets across Australia saw the value of savings squirreled away in FMDs grow to a record $3.2 billion by the end of last financial year – up from a respectable $2.78b record in June 2010. The multiple billions now held in accounts for about 38,500 farming businesses represents a huge leap from just $228,600 deposited in the first FMDs in June 1999 when the federal government first allowed farmers to put money into the term accounts and defer paying tax until the funds were withdrawn. Industry observers aren’t certain if 2012 will see another FMD record broken when this financial year winds up, but it’s quite likely. Bankers say there is no doubt farmers – like the rest of the nation – have become extra conscientious about saving. The newly relaxed FMD conditions are expected to encourage producers to take advantage of the flexibility now available them and think more about using FMDs, possibly instead of some conventional term deposits. While the FMD savings ceiling remains $400,000, the new flexibility gives farmers the chance to take up a better deal via a second account with their existing bank, or another institution if banks comes up with new interest rate offers that appeal. And with banks more eager than ever to lure in savings to bulk up their coffers with more locally raised funds for their loan portfolios, competition to encourage money into FMDs is hot. “It’s up to the individuals to decide if they want to be managing more than one FMD account, but it’s good for them to have the flexibility available,” said Rabobank’s general manager for rural Australia, Peter Knoblanche. “You can now take up a new deposit arrangement if a better deal comes along without having to wrap up an existing account (and potentially pay any outstanding tax). “Until now farmers have been limited to just one deposit account – it might have totalled $20,000, $50,000 or $400,000. “The government has now decided you can now have as many accounts as you wish so long as you ensure their combined value doesn’t exceed $400,000.” Rabobank’s deposits manager Carlos Vieco described FMDs as a core product for the specialist agribusiness institution. The bank keenly promoted its one or two year fixed rate FMD accounts to help spread part of a farm’s income from better earning periods to future leaner times when the funds might be better utilised, and would attract less tax because overall earnings were down. Mr Vieco believed increasing numbers of its new farmer clients were attracted to Rabobank last year because of its FMD offering. “We get the feeling they like the safety of our strong and global network, and particularly our primary focus on the agriculture sector. “The fact that Rabobank is a co-operative and not focused on shareholder demands is comforting for many customers.” Although the traditional new financial year draw down of funds saw specialist FMD accounts with all banks in Australia dip to $2.93b by January this year, financial observers believe the current rebuild is quite likely to lift reserves well above last June’s total to average more than $50,000 for each farm enterprise. Rabobank’s Mr Knoblanche said a pretty good season overall which “will probably encourage more saving”. However this year’s pre-June 30 seasonal conditions were still a little uncertain and had delayed some of the farm sector commitment seen in recent years, notably in the cropping sector. “It’s now a fraction dry on the east coast which has created some unease about the grain season, but on the other hand the Australian dollar coming off its recent highs means the outlook is more reassuring for anybody relying on export commodities.”

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