A performance audit of a scheme designed to help farmers set money aside in good years to help pay for the bad years has found its administration to be less than effective.
In his audit report on the Farm Management Deposits (FMD) Scheme, Auditor-General, Grant Hehir found the primary producers’ deposits into the scheme could be tax deductible in the off year and only become assessable for income tax when they were withdrawn.
“The audit was undertaken to provide assurance on whether a key measure delivering tax relief for primary producers is being administered effectively,” Mr Hehir said.
“The audit was also undertaken in light of the steep increase in the estimate of revenue forgone for the FMD Scheme in 2017-18.”
Mr Hehir said that at the beginning of the financial year in 2016, three policy changes were introduced to the FMD Scheme as part of the Agricultural Competitiveness White Paper.
These were that deposit limits for FMDs, for each FMD holder, were increased from $400,000 to $800,000; primary producers experiencing severe drought conditions could now access FMDs within 12 months of deposit without losing their claimed tax concession; and FMDs could now be used to offset a loan or other debt relating to the holder’s primary production business.
“The administration of the FMD Scheme has not been fully effective,” Mr Hehir said.
“Risk identification and compliance arrangements to support the integrity of the FMD Scheme have not been fully effective.”
He made a number of recommendations for the Department of Agriculture and the Australian Taxation Office including that an overarching risk assessment of the FMD scheme be completed and the Tax Office’s data matching system be used to support compliance with the Scheme.
The Auditor-General’s report can be accessed on his website at this PS News link and his 46-page report downloaded at this link.
The audit team was Amanda Reynolds, Erica Sekendy and Andrew Morris.
