A major overhaul of superannuation, taxation and trust regulation is desperately required to properly recapitalise Australia’s aging agricultural sector, according to a new detailed report on family farming.
Chapman Eastway, which has been advising farming families for over a century, and Charles Sturt University have compiled a report on succession and inheritance with a long and detailed list of recommendations to smooth the transition for aging farmers and help maintain the viability of farming.
The report authored by Olivia Falkiner and Adam Steen warns about “multiple failed business transitions” and a “serious risk to the survival” of farming enterprises if changes are not made.
With more than half of Australia’s farm owners over the age of 55 and the majority expecting to retire in the next 15 years the issue could also have an impact on Australia’s rural land values.
“The potential tide of future sales posed by this outflow presents a risk not just to owners themselves, whose valuations could be hurt in the supply of businesses for sale, but to the broader economy,” the authors say.
The long list of specific recommendations includes extending related party acquisition rules to allow super funds to acquire mortgaged farming land.
Self managed super fund membership should also be increased for families to allow two direct generations of members to make contributions. If the SMSF owns the farming asset, more members allows for easier succession.
Contribution caps should also be removed or extended for farming assets moved into super.
Recommended change of approach
The recommendations also look into the treatment of capital gains.
“There should be blanket CGT and stamp duty relief for genuine intergenerational transfers of assets, in context of a wider move towards an ‘innocent until proven guilty’ approach.
“CGT rollover relief should be expanded to allow primary production land to be transferred between family trusts – particularly to address vesting and perpetuity issues associated with the limited lifespan of a trust.”
The report, which used a survey sent to 3000 participants this year, draws upon the response of 300 farm families.
A quarter of the respondents reported that the succession process was “traumatic”. A fifth said there were still unresolved family issues
“Succession is not extensively discussed by farm families often resulting in a lack of preparedness for sudden change, which can have significant implications for farm ownership.”
While there are obviously many reasons farming businesses can fail, such as drought and mismanagement, the rules around superannuation and tax have weighed down the sector where 95 per cent of operations are owned by families.
Chapman Eastway Principal Anthony Ryan said bipartisan support was desperately needed to address such looming issues.
“Failure by government to not consider these initiatives would doom many Australian farming families selling their land to facilitate succession within the family rather than continue the tradition of family farming.”