Share Farming

Many long-term arrangements succeed by combining skills and resources. Success depends on: 

• Financial returns: realistic returns for each party, tested with real data before starting and reviewed during the agreement. 
• Farming philosophy: compatible views on running the farm, reinforced through shared budgeting. 
• Personal fit: communication, empathy and mutual respect. 
• Clear arrangements: transparent income and cost sharing, reviewed regularly, ideally monthly. 
• Defined control: a clear discussion of decision-making roles and responsibilities. 
• Agreed communication: set methods for meetings and day-to-day contact. 
• Written agreement: a tool to surface issues and test compatibility before the arrangement begins. 

Next step: the discussion Checklist is a useful starting point for working through these elements. 

Arrangements are often based on the share of income received and costs paid by each party - for example a 50/50 share - and, importantly, the operating profit and return on assets for each party. 

Next step: use the fairness and affordability Calculator to assess a proposed or current arrangement.

Both parties' financial positions matter. However, debt levels and debt servicing do not determine what is a fair share arrangement. 

Owners must be financially strong enough to support engaging a share farmer. Share farmers providing assets must consider whether they can manage repayments and the early cash flow delays. 

Strong financial management in these early stages is critical to growing net assets.

A share farming agreement usually starts with both parties meeting an adviser to clarify their goals. For example, an owner may want the share farmer to handle daily management while both share seasonal decisions. This defines how much control the owner hands over, and shapes cost and income sharing. 

The agreement should set production and budget targets, based on price forecasts and historical data. Review these targets during and after the first year, to check business performance and whether each party's expected returns were met. 

As the business changes, review the share arrangements so the split stays fair: 

• the owner, share farmer and adviser draft and review the agreement, making changes as needed, 
• an accountant may be consulted to get the financials right for each party, and 
• a solicitor may ratify the agreement, or it may remain a memorandum of understanding. 

The aim is an agreement that is fair and relevant, then checked legally and financially. The more detailed the discussions, and the more they are written down, the greater the chance of success. A written document also assists with the termination and exit process if the arrangement does not work.

Signing a milk supply arrangement together does not create a share farming agreement. That is only the income share. The agreement should have two parts: standard clauses, and non-standard clauses that vary with what the parties agree. 

Next step: tailor the share dairy farming Agreement to the situation. 

When renegotiating, both parties should review how the previous agreement worked. Two issues shape success: 

1. the share farmer's ability to improve dairy profitability, and 
2. the share farmer's role in maintaining the land's condition and asset value. 

Because asset care and profit can conflict, owners and share farmers should discuss these priorities regularly - and always on renewal - to reach a workable balance. 

Next step: use the renewal Checklist to guide negotiations. Each party should complete it independently, exchange copies, allow a week to reflect, then meet to discuss. 

The federal Independent Contractors Act 2006, in effect from 1 March 2007, allows unfair work contracts to be challenged. It defines an independent contractor using the common law control test, and gives the court power to review, vary or set aside an unfair contract. It applies where at least one party is a company and the work is not domestic or private. 

Several legal obligations apply, including residential tenancy laws, the NSW Agricultural Tenancies Act, superannuation and workers compensation.

Illegal workers

Farmers engaging contractors must check work rights and comply with illegal worker laws. Liability can still arise under a contracting arrangement. If a contractor does not meet the common law control test, the people they bring onto the farm may legally be the farmer's employees. If those people are illegal workers, the farmer could face criminal charges. See the Employees and Overseas workers sections. 

Share dairy farming combines one party's land and assets with another's management skills and stock. The parties share income and costs - often on a 50/50 basis - and, importantly, the operating profit and return on assets.

A share farmer is a type of independent contractor, working under a commercial contract for services. However, if the owner controls how, when and by whom the work is done, the share farmer may be treated at law as an employee. 

Success depends on realistic financial returns, compatible farming philosophies, personal fit, transparent income and cost sharing, clearly defined control, agreed communication, and a written agreement. 

Yes. A written agreement is strongly recommended. It should set production and budget targets, define control and income sharing, and include standard and non-standard clauses tailored to the arrangement.