The Auditor-General has recently undertaken an independent performance audit into the Farm Management Deposits (FMD) Scheme.
The FMD Scheme is a key measure designed to deliver tax relief for primary producers.
The purpose of the audit was to determine the effectiveness of the ATO and Department of Agriculture in administering the FMD Scheme, particularly in response to an increase in revenue forgone in the 2017/2018 financial year and due to policy changes made to the FMD Scheme in 2016.
The 2016 changes included:
- increasing deposit limits from $400,000 to $800,000;
- enabling primary producers who are suffering severe drought conditions to access their deposits within 12 months of deposit without losing their tax concession; and
- using FMDs to offset loans or other debts relating to the holder's primary production business.
The two key factors considered by the Auditor-General were whether the risk identification and compliance arrangements in place were effective in supporting the FMD Scheme and whether the changes made to the FMD Scheme in 2016 were achieving the objectives of the FMD Scheme.
- there was a lack of take up by primary producers of the 2016 changes to the FMD Scheme, particularly the loan offset provision; and
- the compliance arrangements and risk assessment processes designed to support the FMD Scheme were not fully effective, in that they had not fully captured key elements of the FMD Scheme design.
The Auditor-General made four key recommendations:
- The Department of Agriculture's planned evaluation of the FMD Scheme should include a focus on how the FMD Scheme assists primary producers to become more financially self-reliant;
- The Department of Agriculture, working collaboratively with the ATO, complete an overarching risk assessment of the FMD scheme with the ATO providing input on tax risks;
- Both the Department of Agriculture and the ATO each review the quality of the FMD Scheme data provided to them by various financial institutions to ensure the data is fit for purpose and consider options to improve the use of the data; and
- The ATO to use data matching to assist compliance with the FMD Scheme and maintain visibility over the nature and extent of compliance activities conducted on the FMD Scheme to ensure these are commensurate with the assessed level of risk.
While both the Department of Agriculture and the ATO have agreed to the recommendations, it remains unclear at this stage whether any changes to the FMD Scheme will be introduced. For now, watch this space.
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