Preparing the Family and the Farm for longevity: Family Farm Succession Planning in Victoria

For regional Victorians, the family farm is not just a land or a business; it’s home, a way of life, and a family legacy. It can be inextricably linked to generations of stories and lifetimes of hard work.

Farming families know only too well the hardship and sacrifice that has been endured for the survival of the family farm. It’s understandable therefore that planning for the future is so complex and emotional for farming families.

Family farm succession planning is a critical step in preserving the family farm for the future. In this article, we consider the key elements of family farm succession planning in Victoria and how we can guide you through this process.

Why consider farm succession planning?

There are so many reasons why succession planning is critical to the future of the family farm.

These are just a few:

  1. Preserving the farm identity – protecting against loss of land through sale, disputes, separation and bankruptcy or insolvency;
  2. Ensuring financial security for the retiring generation and the next farming generation;
  3. Maintaining open communication and preventing conflict – without a clear plan and open communication between family members, a lack of certainty can erode relationships giving rise to
    costly and exhausting disputes;
  4. Maintaining appropriate and efficient structures for tax planning and asset protection; and
  5. Ensuring the farm is adaptable to change – without a degree of flexibility, the farm won’t be able to adapt to changing circumstances.

The process

Succession planning often takes time, so starting early and allowing sufficient time and resources to work through the process is critical.

Key steps usually involve:

  1. Identify goals – what are your goals and what are the goals of your family? Who needs to be involved in the decision-making process and which advisors are you going to work with to
    continue to drive the process to the next phase?
  2. Assess the current position of the farm – conduct a thorough review of the farm’s financial position, existing entities and structures and identify opportunities for improvement and
    growth if desired.
  3. Communication – establish clear and open communication with all family members involved, on and off farm.
  4. Documentation – work with your trusted advisors to document your succession plan, attend to any restructuring and land transfers required, updating wills and preparing family
    agreements as required.
  5. Planning – consult with your accounting and financial planning advisors to ensure tax and financial planning has been addressed.
  6. Review – a succession plan needs to be regularly reviewed and updated to adapt to changing circumstances over time.

Tools available to assist with implementing your plan

In many cases, it’s worth considering a restructure of your farm landholdings and business to a more flexible structure, enabling you to transition control of these to the next generation when you are ready to retire.

There are some specific concessions and exemptions currently available in Victoria to facilitate intergenerational transfer of family farm land and assets.

  1. Family Farm Stamp Duty Exemption (Victoria) – There exists a stamp duty exemption in Victoria designed to assist farm families transfer primary production land to the next generation,
    without incurring significant stamp duty costs. Both the transferor and transferee must meet certain eligibility requirements so the transfer must be carefully documented. Transfers
    must be within a strict group of family members to be exempt. Stamp duty in farm transfers can otherwise be significant.
  2. Forgone Wages Policy (Australia) – There are different asset tests administered by Centrelink in assessing assets for the purposes of considering an entitlements to payments such as the Age Pension and entitlement to Health Care Cards. There are some concessions to the asset tests for farmers who transfer their farm land to a family member when they retire provided certain conditions are met. Ordinarily, such a transfer would be considered a ‘gift’ and therefore considered an asset of the retiring farmer for the next 5 years for the purposes of any Centrelink asset test. However, the forgone wages policy may reduce this gifting period if the transfer is to a close relative who has made unpaid contributions to the farm that count as forgone wages.

These concessions are complex and we strongly advise you to seek legal, accounting and financial advice on how these may apply to your farm succession plan.

By embracing open communication, engaging experienced advisors, and dedicating sufficient time early in the process, farmers can secure the longevity of their two most important legacies – farm and family.

For further advice or assistance Nevetts Lawyers have a dedicated team of solicitors with experience in farm and business succession planning, land transfers, business law and wills and estates such as Tom O’Dwyer, Kent Mallinson, Peter Wilson, Marnie Papst and Josh Curtis. We look forward to guiding you through this process.

Author: Marnie Papst

Published: 2 November 2023


The information in this article is general in nature and is not to be relied upon as legal advice. As always, we recommend you seek thorough legal advice to consider your own circumstances and determine whether the information contained in this article is applicable to you.  This article is current as at the date of publishing but will not be updated as circumstances change.