Does your farm have a succession plan?

Australian-owned family businesses are integral to the survival of small towns. They provide employment, encourage growth, bring money into the community, and are a good indication of the economic health of the town.  

What is succession planning?

Succession planning is an evolving process that ensures the continuation of a business through generations or through layers of management. Not having a plan can have many consequences and can place strain on family relationships, no matter how strong the family dynamics are.

Succession planning is the development of a plan that will allow a smooth transition of the business and any assets with minimal disruption to the business or, importantly, family relationships.

It is a challenging process - it is hard to talk about subjects like death, serious injury and divorce. Often family members will have different expectations in respect of future ownership of assets and aspirations in respect of involvement in the business. However it is better to understand and address these at the time of formulating the plan rather than have a family member challenge a Will following the death of the matriarch or patriarch.

What are the key components?

Succession has been referred to as a three legged stool as there are three equally indispensable parts of the process:

  1. Estate planning - transfer of ownership of family/individual assets.
  2. Retirement planning - transition of labour and management 
  3. Business transition / Succession planning - transfer of management and/or control of the family farm business (or a part of) to another member(s) of the family.

What does succession planning achieve?

Getting a plan in place can take time, effort and a need to balance competing interests. However, a successful plan can achieve multiple goals:

Getting the structure right 

The tax consequences of transferring assets can be substantial with the potential for stamp duty, income tax and capital gains tax to significantly erode capital available to the continuing farm business and / or the retiring farmer. It is therefore important to involve professionals early in order to develop a tax efficient structure, for example by accessing the small business capital gains tax concessions:

Key questions

In developing a succession plan, the following key questions could be asked:

Have you thought about your succession plan? Or is it something that you have put to the bottom of the pile to deal with another day? Need assistance? Phone our office on 07 4151 8898 and start the conversation today.

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