FOR FARMING FAMILIES

Tax, insurance and the team behind your farm succession plan

The tax side can decide whether a farm succession plan works. Insurance is one of the most overlooked parts of it.

Both need a specialist who understands farms. And both start with asking the right questions.

Tax

The difference between a well structured and a poorly structured transition can be substantial. This is where you need a specialist agricultural accountant, not a general one.

Look for someone who understands CGT concessions for primary producers, farm business structures, and how farm assets interact with Centrelink.

None of this is tax advice. The questions are there to make sure you cover the right ground with your accountant.

• What would the capital gains tax (CGT) bill be if the farm were sold outright today?
• Are you eligible for the small business CGT concessions? Ask about the 15 year exemption, the active asset reduction, the retirement exemption and rollover relief.
• What are the stamp duty implications of different transfer options in your state?
• Are there GST implications for asset transfers?
• Would restructuring into a different entity, such as a trust or a company, offer tax advantages for the transition?
• If part of the farm is donated, for example to a charitable trust, what tax deductions might apply? Has your accountant confirmed that against your actual situation, rather than assumed it?
• What do the different options do to primary production averaging?
• Are there Farm Management Deposit (FMD) implications?
• What are the estate planning tax implications? Think about the death of a partner, testamentary trusts and transfers made before death.
• Has your accountant modelled the tax position under at least two succession scenarios, so you can compare?

Insurance

The right insurance can stop a personal tragedy from becoming a financial catastrophe for the whole family.

• Does the retiring farmer have life insurance? Is it enough to cover any debts or obligations that would fall on the family?
• Does the incoming farmer have life insurance? Without it, the succession plan may not survive if they die or are disabled.
• Is there income protection insurance for the key operator?
• Is there total and permanent disability (TPD) cover?
• Is the farm adequately insured? Property, machinery, livestock, crop, public liability.
• Do the policies reflect the new arrangements? They often need updating when ownership or management changes.
• Have you reviewed all of it with a broker who understands agricultural businesses?

The rest of your team

Alongside the accountant and the broker, you need advisers who understand agricultural succession:

• An agricultural solicitor who drafts share farming agreements, vendor finance arrangements and farm succession structures regularly.
• A financial adviser who understands rural retirement, superannuation for farmers, and the particular challenges of funding retirement from farm assets.
• An independent rural valuer, for an accurate, current assessment of the farm's market value.
• A farm business adviser who can assess the farm's viability under different succession scenarios, model the financials, and coach the incoming farmer.
• A succession facilitator who can hold the family conversation.

Cultivate Farms can hold that conversation if you want someone outside the family.

The full guide, The Cultivate Farms Succession Guide, is free at cultivatefarms.com/resources.

You can build your own plan at cultivatefarms.com/plan.