Issue link: https://viewer.e-digitaleditions.com/i/131975
financespecial Stormproof Greg Leahy explains how to make Farm Management Deposit Accounts work for agribusinesses, no matter the weather. The recent spate of wild weather events, including widespread bushfires, cyclonic conditions and flooding, that has impacted so many people this year has highlighted the unpredictability of the agribusiness industry in Australia. In any business, cash flow is key – it's what keeps businesses running. And in any seasonal industry, maintaining a solid, steady and stable cash flow during economic fluctuations is a challenge that requires good management and planning. Fortunately there are ways those in the agriculture industry can manage their long-term financial risk. Unique to agribusiness, Farm Management Deposit Accounts (FMDAs) were introduced by the Australian federal government to assist primary producers with cash flow management by encouraging the preservation of surplus cash for times when it is needed most. FMDAs offer tax incentives for depositing surplus revenue to help producers better manage their highly variable incomes. Those deposits can be used to set aside pre-tax income in profitable years to establish cash reserves in order to better manage through the lean years. They also allow for the deduction of the amount of deposits from assessable income, with interest paid on 100 per cent of eligible deposits. Eligible primary producers can shift their pre-tax dollars (surplus funds) from higher income years to lower income years, thereby reducing their exposure to adverse seasonal and economic fluctuations. 72 FMDAs offer a number of benefits: • Fixed or variable rates are available. • The accounts earn high interest on pre-tax income. • Manage exposure to seasonal and commodity fluctuations. • Interest payment frequency on fixed terms can be selected. • Interest can be paid annually and deposits can be withdrawn in low tax years to reduce the tax burden. • No fees. FMDAs offer a secure investment with a predictable return and are well worth considering as part of an overall cash flow management plan. Greg Leahy is Suncorp Bank's national head of agribusiness. Call 13 11 75 or visit agribusiness.suncorpbank.com.au to locate your local agribusiness specialist. Visit: agribusiness.suncorpbank.com.au