Why succession works or fails on what you own away from the land

The most common reason a farm succession plan comes undone is parents handing over the country and then discovering they still need the farm’s income to live on.

The title has moved but the income hasn’t, and the kid now running the place ends up working to fund the parents’ retirement instead of building his own business.

This gets a fraction of the attention tax does, despite mattering more. Your son has to make the same living off the place that you made, and to do that he needs the run of the whole property. If your grocery bill is still coming out of the farm account, the handover isn’t complete: you’ve given away the title but kept the income.

The work happens years earlier, and off the farm

That means superannuation, money invested well clear of the land, and surplus cash put away in the good years instead of tipped into more country. None of it is exciting and none of it feels urgent when the season’s good, which is exactly why it’s the thing that gets left.

The test is simple enough. Can what you own away from the farm cover your living costs for the rest of your life, with no help from the business? For the families we work with that’s usually a number between $120,000 and $200,000 a year, depending on how they want to live. Farm Management Deposits carry the first few years. The bulk is superannuation and a portfolio built up outside the land over a long time, sometimes with a hand from selling a block that was never core to the operation.

None of that money cares about rainfall, cattle prices or how the season went.

Leasing is not a retirement plan

Until a title transfers, the next generation should be paying a lease on that country. Somebody’s name is on the title, they’re entitled to be paid for the use of it, and the bloke farming it should be costing that in alongside fertiliser and fuel. It does the son a favour too, because a business that has never carried the true cost of the land it runs on has never really been tested.

But watch what happens over time. Every title that transfers takes its lease income with it. By the end of the programme the parents have no lease income at all.

That’s the trap: the lease income is engineered to shrink to nothing on a timetable you set yourself, and it was never going to fund thirty years of retirement. What carries you is what you hold away from the farm. The lease is just rent, owed to whoever’s name is on the title that year.

Don’t cut every tie on day one

Farm Management Deposits come with a catch. Stop farming and withdrawals become assessable income. Keep the farming going, keep distributions flowing to you, and the concessional treatment holds.

Capital gains tax runs on a similar principle. Where a title needs the small business fifteen year exemption to move without a bill attached, the owner has to keep a genuine connection to the farming business right up to the transfer. Cut it early and the exemption goes with it.

Both point the same way. The older generation stays involved in some defined, written down capacity rather than walking off the place on a single date. Your accountant will know how that lands in your structure.

So ask yourself this

If you handed the land over tomorrow, could you live the way you want to live on what you own that isn’t the farm?

If the answer is no, start earlier rather than shelving the plan. Building that position takes years and it’s the one part of this you can’t hurry at the end. Where the money is already there, a family can afford to be generous about the timing of everything else. Where it isn’t, the handover comes apart a bit at a time and nobody ever quite decides to unpick it.

Start with your accountant. They know what’s on the balance sheet, what’s in super and what the business can genuinely spare.