Farm Management Deposit (FMD) or Prepay Plus product?

Agribusinses Insights

In recent years, we’ve noticed our clients’ shifting appetite for putting money in Farm Management Deposit (FMD) accounts, in favour of relatively new prepayment products such as the Prepay Plus offered by Nutrien Ag Solutions (Nutrien).The Farm Management Deposit (FMD) Scheme helps primary producers deal more effectively with fluctuations in cash flows.

Both products provide eligible primary producers with a tax deduction in the financial year the transaction is made, whether depositing into an FMD account or paying for a new Prepay Plus arrangement where a tax invoice is provided to the customer.

So what are the differences between these two products?


The Farm Management Deposit (FMD) Scheme helps primary producers deal more effectively with fluctuations in cash flows.

It is designed to increase the self-reliance of farmers by helping them manage their financial risk and meet their business costs in low-income years by building up cash reserves.

Eligible primary producers can set aside pre-tax income to draw on when needed in future years, such as restocking or replanting when conditions start to improve.

Income deposited into FMDs are tax deductible in the financial year the deposit is made, becoming taxable income in the financial year it is withdrawn (repaid).

FMDs do however tie up cash in deposit accounts, and given the current low interest rates, those cash reservices aren’t providing much in the form of interest income.Farm Management Deposits can be seen as an attractive form of tax planning.

They can also become a problem in succession planning, and up until the recent Federal Budgets and introduction of temporary full expensing and instant asset write-offs, can be quite difficult to clear up without causing a taxation headache.


Nutrien’s Prepay Plus provides customers with an upfront tax deduction for Nutrien products when the money is actually paid, but allows the product to remain onsite in Nutrien warehouses until required.

This allows customers to prepay for products required in later stages of their farming cycle, and generally in the next financial year.

Nutrien also provide a ‘reward’ credit for the extended time between payment and collection of goods.

Not dissimilar to the FMDs, however this reward cannot be provided as cash back to clients, but only a credit to their Nutrien account.

The reward figure has generally provided a better return than the FMD interest rates available in the last few years.

These prepayment products received Australian Taxation Office rulings when they first started gaining traction in the market to provide clarity on their ability and legality to be used as a tax deduction.

While some may see that the prepayment products are basically bringing creditors forward a year, by moving crop inputs from one year to an earlier one and essentially creating more income in the next year, many are also seeing it as an attractive form of tax planning that doesn’t tie up funds that could instead be used in their farming cycle during the next financial year.

Whilst primary producers are still considering FMDs as a way to manage their taxation position, we have seen a large rise in the popularity of the prepayment product.

How can RSM help?

If you want more information about the benefits of a farm management deposits scheme or a prepay plus product, please contact your local RSM office today.