Withholding Tax On Farm Management Deposits
Anderson Welcomes Removal Of Withholding Tax On Farm Management Deposits
Incoming Federal National Party Leader John Anderson today revealed that the withholding tax applying on the withdrawal of a Farm Management Deposit (FMD) will be removed under the Pay As You Go (PAYG) tax system being introduced next year.
Under the PAYG tax system, farmers will pay tax quarterly based on the actual income situation for the current period, rather than paying provisional tax based on their income for the previous year.
"Provisional tax is one of the most hated taxes in the farm sector because it assumes farm income increases each year, when in reality seasonal and price fluctuations mean it can fall," Mr Anderson said.
"This results in farmers having to pay inflated amounts of provisional tax at times when they can least afford it. They need every cent of cash flow to put back into the business, not into the hands of the taxman.
"While farmers have the ability to vary their income estimates for provisional tax purposes, few do because there are significant penalties for those who do so and get it wrong.
"The great news is that provisional tax will be abolished under the new tax system."
Mr Anderson said that under current arrangements, funds withdrawn from FMDs are subject to a 20% withholding tax, but this would be a thing of the past under the new tax system.
"Farm Management Deposits are run commercially by financial institutions and were introduced by the Coalition as part of the Agriculture - Advancing Australia package.
"FMDs replaced the old Income Equalisation Deposit Scheme and provide farmers with a tax-effective financial management tool that allows them to set aside income in good years and draw down on it when they need it most.
"I am delighted that the new tax system has further improved FMDs."