Farm Management Deposits (FMD) are a useful tax smoothing tool for Primary producers. They allow an individual who earns primary production income to deposit funds into a FMD in a good year and get a tax deduction equal to the greater of the deposit or their primary production income for that year if held for at least twelve months. When the money is withdrawn from the FMD it is assessable income to the tax payer. FMDs earn interest income assessable to the tax payer each year.

From July 2016 the Australian Taxation Office (ATO) have allowed for FMDs to offset loans which have been used to invest in primary production assets.

There a few restrictions to using the offset, being:

1. The FMD & Business loan have to be held by the same financial institution
2. The provision is only available to sole traders and individual partners in partnerships
3. Loans have to be 100% related to primary production business (not a mixed loan)

For example; a farmer has a $100,000 in a FMD and a $500,000 primary production business loan. The $100,000 could be used to offset the loan so that interest is only charged on $400,000.

Currently there are only a few banks that allow this feature being; Rural Bank, Rabobank, Elders, NAB & CBA.