Dealing With Farm Succession & Its Challenges
In this Insight, Anthony Pearson CA talks about dealing with farm succession & its challenges. Anthony takes you through the process, and the tough decisions and discussions you may need to have.
Prime Minister Scott Morrison was earlier this year criticised for making the false statement that “the average age of Australian farmers is over 60 years”. In his defence he was very close. It is 57! (according to the Australian Bureau of Statistics’ most recent survey).
What we can’t argue about is the growing pressure on farmers because of drought, high input costs, and low prices for their end product.
The day-to-day stress and uncertainty is leading farmers to consider alternatives, with many farmers choosing to leave the land, and others planning succession to the next generation whose enthusiasm and drive will take the farm into the future.
In my 20 years at MB+M, I have helped many clients in both scenarios. It is always a very difficult time for clients and emotions can run high. I have seen the good, bad and the ugly. In my experience, there are some key elements that increase the chance of achieving the best outcome.
My four key steps to preparing for a farm exit/succession plan:
Even if your planned exit from farming may not be for several years, or in the distant future, it is wise to think
Have brave conversations
Most of the time, the fear of the unknown prevents these difficult subjects from being talked about.
“What will we do if we are not on the farm?”
“Do we have enough wealth to enable us to retire now?”
The potential sale or transition of what is often a multi–generational family farm brings up strong emotions and feelings. Remember, it can resolve nothing until we lay everything out on the table. The smoothest farm transitions occur when the exiting farmers are both financially and emotionally ready. The sooner the brave conversations occur, increases chance they will tick both boxes.
Respect other’s point of view
Often there will not be an outcome that will be ideal for all parties involved. The retiring generation may have needs and wants that are very different to the new farmers and their partners. Considering the view of each stakeholder is critical, and often it requires a compromise to get the deal done.
We find that there are usually several family meetings as the plan develops, and often these meetings are best chaired by an external party, such as an MB+M staff member! In our experience, the best results come from having someone emotionally detached, but who knows the family well enough to help navigate outcomes respectfully and sometimes ask the hard questions which many families avoid.
Engage those with knowledge
You don’t know what you don’t know. Usually, farm succession or exit will involve transferring of assets, complex tax law, and legal issues. Sometimes the way forward is a path that a farmer has not even considered a possibility.
There should also be consideration of how the exiting farmers will then fund their retirement, which may involve superannuation or accessing Centrelink benefits. There may also be a need to review and draft new wills, and review insurances. It is critical to engage with someone that conveys trust, but can also cover off on all the areas needed.
So, our recommendation is to stop putting off taking that first step. The best place to start is to talk with a trusted member of the MB+M team. They understand your business, the people within it, and your financial position. They have also seen this scenario many times before and can offer suggestions of how things might work. The hardest place to start is to ask for help, so consider whether you’re ready to take that next step and start thinking about your succession plan. The key is patience, and we’re ready to help you on that journey.
So that’s it about dealing with farm succession and its challenges.
Interested to know more about what an accountant can do, then read more here: What does an accountant do?
& Senior Advisor
Anthony is a Chartered Accountant and senior adviser at MB+M. He is passionate about helping clients navigate their journey from starting their business, making them more successful to
Anthony has been a part of the MB+M team for over 20 years. He is a committed member of the local community and regularly seen providing help at different community organisations. He is also a great musician and entertain’s occasionally at different family occasions, and with an odd song or two at MB+M events as well!