Farming and horticulture are not like normal businesses: you need to give additional consideration to cash flow, seasonal variations, non-financial benchmarks and family.
Not all farmers have a farm advisor and often have the need to do a farm budget or a requirement to produce a budget or forecast for financiers. We have software that can produce a series of reports that are adaptable and can be rolled over to ongoing years. Some of the areas we have assisted clients are:
- Assessing the financial impact of purchasing more property
- Assessing the financial impact of changing the mix of produce and livestock
- Assessing the financial impact of yield expectations (best, worst or expected)
Farm sales usually involve big dollars and it is essential that clients have a full knowledge of the potential taxation, GST and Stamp Duty issues that may arise. The sale process needs to be planned as there can also be other family succession issues that need to be addressed.
The purchase of additional farming property also needs careful planning with regard to the ownership structure and the financial feasibility and cash flow consequences of the purchase.
There are many considerations that need to be taken into account when reviewing ownership structures both currently and with a new purchase. Some of these issues are:
- The separation of the operational function from the asset holding entity.
- Utilisation of the tax concessions available to primary producers such as the income averaging provisions.
- Protection of assets from family breakdowns.
- The ability to accommodate family succession from generation to generation.
By nature, primary producers are largely reliant on the weather that can have a big impact on expected income from year to year. Therefore, it is critical to manage cash flow and the impact that taxation has on the capacity of the producer to have the cash to meet ongoing commitments. We make it compulsory for all clients to participate in tax planning in the June Quarter of each year to ensure that they are best placed to deal with the many taxation concessions that are available to deal with the ups and downs of income from year to year.
Many primary producers have the active involvement of family in the operation of the business. Succession planning is essential to ensure that all active and often inactive family members have a clear understanding on the succession process should a family member decide to retire from the business.
This process will require family meetings and usually the drafting of legal documents to ensure the agreed process occurs.
There can be a significant cost involved with the purchase of new plant and equipment and often there is not necessarily the financial due diligence done to determine if the purchase decision is the best decision. We have many models that can assist clients with the purchase decision to sell, keep or replace that will put your mind at ease.