FOR ASPIRING FARMERS
Is a sharefarmer an employee? Share farming and the law
By Sam Marwood
A sharefarmer is usually not an employee. You run your own business alongside the owner's.
In New South Wales, the Agricultural Tenancies Act covers sharefarmers as well as tenants. Whatever state you're in, what you are under your agreement depends on the document and on the law of your state.
The shape of the arrangement is two entities, two sets of books, two tax returns, no joint bank account, and no set payment to either party. Whether you need separate entities is a question for your accountant.
Why it matters
That distinction changes the tax treatment, the labour law position and where the risk sits. It's the technical heart of share farming, and it's routinely misunderstood, including by people already doing it. It's the one thing to take to your adviser.
The biggest legal risk is an accidental partnership
If you don't document the agreement properly, you may be treated as having formed a partnership, with the liability and tax consequences that carries, whether or not either of you meant to form one. It's usually discovered late, by an accountant, at the worst time.
Set up properly, the owner isn't liable for your business, and you aren't liable for theirs. That separation is the reason the structure exists, rather than a partnership.
If you want a wage, this isn't it
You're running an enterprise, not holding a job. There's no payment you can count on. In a bad season you can work a full year and take home very little, and unlike an employee you have no wage to fall back on.
And if the owner can't resist directing the work, they want an employee. Calling it share farming will cause problems with more than the relationship.
Questions to take to a solicitor
- Does this agreement create a partnership, and what in it prevents that?
- Am I an independent contractor, an employee, a tenant or a partner under this document and the law of my state, and what turns on the answer?
- Who is liable if the other party's business fails, or if something goes wrong on the farm?
- What does the document say about who controls the day to day work, and does that description match what we actually intend to do?
- How does either of us end this, and what happens to the standing crop or the stock when we do?
A solicitor who has done farm transitions is the right person for these. A suburban conveyancer and a general tax accountant are the wrong tools, because this has technical edges a generalist won't know to look for.
The questions for your accountant, and what to do when the two advisers disagree, are here: What to ask your solicitor and accountant before you share farm.
Read more: What goes in a share farming agreement.
This is general information, not legal or tax advice.
The full guide, You Can Own a Farm, is free at cultivatefarms.com/resources.
You can build your own plan at cultivatefarms.com/plan.