Succession Planning a Key Part of Business Planning

Farmers are renowned for spending a lot of time thinking about and working on their business, but one area that often ends up in the "too hard basket" is the thought of succession planning. Over the past decade, land values have increased substantially, the cost of establishing, in particular dairy farming activities, has increased substantially as has, it turns out, the average age of not only dairy farmers, but farmers in general.

For many, the mere thought of succession planning sends a shudder down their spine as it forces them to consider not only their own mortality, their family, and the assets that they hold dear. For the next generation, this can be frustrating and when the time eventually does come where succession planning is forced upon a family farming situation, the outcomes can be quite costly from a tax perspective and certainly from a family perspective as it can often lead to disagreements and falling out. Many of these issues can be mitigated through some forward planning.

As a starting point, your existing business structures need to be performing at an optimum level. Taxation plays a major role in this and whilst we all accept we have to pay tax, we don't want to pay more than we need to. The wider agricultural sector has a number of specific tax regimes applying to it and it is important that you take full advantage of these regimes. Succession planning as an important part of this process.
We suggest that the succession planning process is started well before it becomes a necessity. This could involve building up non-farm assets outside of the farming business structure or gradually transferring ownership to the next generation in a manageable way so that those who are contributing to the increased wealth of the farming business do not then have to purchase all of that wealth at a later date.

WHK's team of agribusiness experts will be at the Waimumu Field Days to discuss any business, tax, or succession issues that you may have.

Contact Tony Marshall - Agribusiness Taxation Specialist or one of our Farming team for more information on this article