Article by Brant Jansen
as featured in the Farm Weekly "Special Feature" issue 11 August 2022
Say the words “succession planning” and you will no doubt get a mixed response amongst the farming community. From positive responses to negative responses and everything in between!
For most farming businesses succession planning is very challenging. Not just due to the legal and tax issues that are involved, but also the emotional issues that come with dealing with sometimes confronting decisions. This can include mum and dad relocating, dealing with the loss of control and trying to balance the future viability of the farm with being financially secure themselves. It can be easier to keep doing the same thing than facing up to some tough questions and issues!
At times succession planning is delayed or ignored because the older generation can sometimes feel it means transferring assets now. But the key word is planning! It’s about planning for the eventual transfer of the business and the land.
Our advice is that no matter how easy or difficult your succession plan is, things only get harder by delaying it.
By starting the process sooner rather than later, it means the older generation can start to consider their future and retirement funding needs. It also gives the younger generation some direction and security with their lives and future financial position.
Our approach to succession planning is to start with individual meetings with the older generation and the younger generation, aiming to find some common ground amongst all the issues. Once this is achieved a succession plan can start to be developed which will then need to be further discussed and refined.
It’s also important to separate the transition of the business, which is often be the first step, to the transition of the land, which could be transferred gradually or at a later stage.
Once a succession plan is developed, we then need to deal with the structuring issues involved and the tax implications, including income tax, capital gains tax and transfer duty. Whilst there are significant concessions that are potentially available, they are very complex and can only be accessed if the structuring is right. It sometimes takes a few years to set this up, so again it comes back to planning!
In summary our tips for succession planning are:
- Start sooner rather than later
- Understand your current business structure and land ownership
- Communication is vital
- Seek advice
Please feel free to contact your local Byfields office to discuss further.
Disclaimer: This content provides general information only, current at the time of production. Any advice in it has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material.