Key Highlights

  • Agriculture officials have confirmed some restructured farms could lose Farm Management Deposits access.
  • Only an individual can claim a deduction for a Farm Management Deposit, according to the ATO.
  • One in three agricultural trusts reported some non-primary production income in the latest year.
  • Officials have not counted how many farms could be affected by the change.

Farmers weighing whether to pull their businesses out of family trusts before Labor's proposed 30% minimum tax on discretionary trusts now have a new risk to price in. Agriculture officials have confirmed at Senate estimates that a farm Business moving its entire operation from a trust into a company could lose access to Farm Management Deposits, the tax-deferral scheme many producers rely on for drought and lean years. And officials have not counted how many farmers that could hit.

The Senate Economics Legislation Committee holds hearings on the trust tax bills on 5 and 6 November, with its report due on 13 November.

What officials told Senate estimates

Department of Agriculture, Fisheries and Forestry (DAFF) deputy secretary Chris Toyne was asked about a farm business converting its whole primary production operation from a discretionary trust into a company. He agreed it could lose access to Farm Management Deposits (FMDs), according to reports.

"If it completely removed those Assets and restructured its business as a corporation or company, that's correct," Mr Toyne said, as reported.

He confirmed DAFF had not cross-matched agricultural trust data with FMD account data to estimate how many producers were exposed, had not been asked to assess farmers' compliance costs, and had not discussed stamp duty relief with the states. "Stamp duty is a matter for states and territories," Mr Toyne said.

Why a company structure can rule out an FMD

The problem lies in the scheme's existing eligibility rules, not in the trust tax bills.

According to the ATO, only an individual can claim a deduction for an FMD. That includes a partner in a Partnership or a beneficiary of a trust. The ATO states that "Companies and other entities are not eligible for an FMD account."

So a farmer receiving primary production income as a trust beneficiary can generally use the scheme. If the farm moves into a company, the farmer may no longer be the one carrying on the primary production business, and the company itself cannot hold the account.

Under the ATO's rules, an individual must also:

  • Be carrying on a primary production business in Australia when the deposit is made
  • Have no more than $100,000 of taxable non-primary production income in the year of the deposit
  • Hold no more than $800,000 in total FMDs.

Each deposit must be at least $1,000. The deduction cannot exceed taxable primary production income for the year. Money withdrawn within 12 months generally loses the deduction, although there are exceptions for severe rainfall deficiency, natural disaster assistance, Bankruptcy and death. Withdrawn money is generally assessable in the year it comes out, shifting income from good years into bad ones.

The size of the savings at stake

Primary producers held $7.04 billion across 43,613 FMD accounts at 30 June, reports said. The same report elsewhere describes the scheme as worth $6.3 billion, so the exact total should be treated with some caution.

The exposure comes from farms that earn more than farm income. Primary production income is exempt from the proposed minimum tax. But many farming trusts also earn money from property rentals, contracting, tourism or renewable energy, such as leasing land for wind or solar projects.

One in three of Australia's 37,663 agricultural trusts reported some non-primary production income last financial year, according to the report. ATO data for 2023–24 showed these activities made up 19% of business income reported by agricultural trusts.

Opposition agriculture spokesman Darren Chester said the government "has encouraged farmers to diversify to build resilience", but that income is not covered by the exemption.

Hypothetical example: the wind farm lease

Hypothetical example: Jane is a beneficiary of her family's farming trust. In a strong season she receives $180,000 of primary production income from the trust and $40,000 from a wind farm Lease on part of the property.

Because her non-primary production income ($40,000) is under the $100,000 limit, she could deposit, say, $100,000 into an FMD and claim a deduction for it. That reduces her taxable primary production income from $180,000 to $80,000 for the year. If she withdraws the $100,000 in a drought year two years later, it is generally assessable then.

Now suppose the family moves the whole operation, including the land and lease, into a company. The company cannot hold an FMD, so on the ATO's rules that option would generally close, and any state stamp duty on transferring the land would also apply.

The partial rollover, the harvester problem and the bills

The government has proposed partial rollover provisions. These would let farmers move non-primary production assets out of a discretionary trust while keeping farming activities inside it. Mr Toyne said this may let farmers keep primary production assets in a trust and potentially keep FMD access.

The harder cases sit in between. Nationals leader Matt Canavan asked how a harvester used on the farm and also for contracting work for neighbours would be treated if the business were split. Officials could not give a definitive answer. "We're getting to the edge of our bailiwick," Mr Toyne said, as reported.

Senator Canavan accused the government of creating unnecessary complexity. In a separate statement, a DAFF spokesperson said the department was continuing to engage with Treasury, including on how the reforms interact with existing primary producer tax concessions. "The decision to restructure rests with individual businesses," the spokesperson said.

The FMD rules above are current law and ATO guidance. The trust tax is not law. The Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 and the Income Tax Rates Amendment (Minimum Tax on Discretionary Trusts) Bill 2026 passed the House of Representatives on 29 October and are now before the Senate.

As drafted, the 30% minimum tax would start on 1 July 2028. Restructure relief would be available from 1 July 2027, and officials told estimates farmers would have a three-year rollover relief window to consider their options. The bills could still be amended.

What to watch

  • 5–6 November: Senate Economics Legislation Committee hearings on the trust tax bills.
  • 13 November: the committee's report is due, which may address primary producers and FMDs.
  • Any Senate amendments on how the rollover treats mixed-use assets.
  • 1 July 2027: proposed start of restructure relief, if the bills pass.
  • 1 July 2028: proposed start of the 30% minimum tax on discretionary trusts.