Braddon Liberal MHR Gavin Pearce is urging farmers to repay borrowed principal when they have a good year.
Commenting on the state government's new farm debt mediation scheme, Mr Pearce, a former farmer, said this year had been very good for the sector.
"It's been one of the best years in the last decade. It was a good season combined with good prices, interest rates as low as anyone has seen them and the availability of finance everywhere," he said.
IN OTHER NEWS:
"But we still have an obligation to pay that debt back when we do have a good year.
"Who's to say what's happening next year? There is a risk and we need to pay principal back."
Mr Pearce said in June 2018, the state's agricultural debt was $1.9 billion.
"Tasmania has the highest proportion of debt in arrears of any Australian state."
The federal government had been urging states to encourage farmers to pay back principal and get a better future.
"We need to stand by them and help them. When a farmer gets to the point where they think they're in trouble, it's often too late," Mr Pearce said.
"They always leave it to the worst possible time."
Financial consultant Greg Bott said the farm debt mediation scheme was long overdue.
"After the Royal Commission the banks were beaten up badly, and in the last five years they have been far more conciliatory towards people in this position."
He said the Devonport region had less farm debt, with more debt being held further west.
"The mediation service certainly would have been far better if it had been in place ten years ago."