FMDs vs Super Contributions: Are you utilising both?

TL;DR

Farmers over 55 should consider balancing their investments between Farm Management Deposits (FMDs) and superannuation, with a focus on gradually transitioning towards superannuation as they approach retirement.

Transcript

good day and welcome to this week's video my name is robert gowdy and this week we're going to have a look at farm management deposits and comparing that to superannuation uh contributions as an alternative so if you're not a farmer you can yeah stop watching straight away but if you are a farmer and particularly if you're a farmer that's over 55 t... Read More

Key Insights

• 🚕 FMDs allow farmers to save pre-tax income for future use, providing a tax deduction and tax-free growth until withdrawal.
• 🤑 FMDs are beneficial for drought-proofing and preparing for tough years, but the money will eventually need to be withdrawn and taxed.
• 🧑‍🌾 Superannuation offers tax advantages and easier access to funds after 65, making it essential for farmers approaching retirement.
• 🧑‍🌾 Farmers over 60 should prioritize superannuation contributions to maximize their concessional contributions and plan for post-retirement financial stability.
• 🤕 Younger farmers can benefit from focusing on building up FMDs as a buffer for difficult years and gradually transitioning towards superannuation as they approach retirement age.
• 🤑 Large amounts of money in FMDs can become difficult to withdraw, especially in areas with consecutive good years, emphasizing the importance of considering superannuation.
• 👻 Using a combination of FMDs and superannuation allows farmers to balance their financial investments and maximize tax efficiency throughout their agricultural careers.

Questions & Answers

Q: What are Farm Management Deposits (FMDs) and how do they work?

FMDs allow farmers to set aside pre-tax income from their farm, providing a tax deduction and tax-free growth. The money can be withdrawn in future years if needed, making them suitable for drought-proofing and preparing for bad years.

Q: Can FMDs be withdrawn immediately?

No, FMDs cannot be withdrawn within the first 12 months. If withdrawn, the money is included in taxable income. This aspect should be considered when deciding to rely solely on FMDs.

Q: Why should farmers over 60 prioritize superannuation contributions?

Superannuation contributions are tax-efficient and can be withdrawn immediately after turning 65. As farmers approach retirement, it is essential to maximize their concessional contributions into superannuation.

Q: Should younger farmers focus on FMDs or superannuation?

Younger farmers, especially those in their 20s to 40s, can benefit more from FMDs as they build up their cash reserves and prepare for difficult years. Superannuation becomes more attractive as they approach 65.

Summary & Key Takeaways

• FMDs allow primary producers to save pre-tax income from their farm, providing a tax deduction and tax-free growth until withdrawal.

• FMDs are ideal for drought-proofing farms and preparing for tough years but will eventually need to be withdrawn and taxed.

• Superannuation should not be neglected, especially for farmers over 60, as it offers tax advantages and easier access to funds after 65.