Retirement Income Strategies

Retirement income strategies are the ways a dairy farm owner can move out of control and ownership of the business while securing an income for the next phase of life. 

Moving out of ownership

The options range from handing some responsibilities to an employee or family member, to engaging a share farmer, leasing, or selling the farm — each with different income implications (see Shared Equity Arrangement). For some, a full sale of stock and land is the priority; for others, the aim is an income from their assets, whether kept in the farm or invested elsewhere (see Changing).

If the farm is kept 

Income can come from wages, drawings, profits or director fees; share farming proceeds or lease income; converting to another enterprise such as beef or heifer rearing; other investments; superannuation pensions; social security; or family support. The move away from control and ownership is not simple, and deferring the decision can harm everyone involved — a trusted adviser, accountant, lawyer, facilitator or financial planner helps (see Getting Help with Planning).

Tax and other issues to plan for 

A change of asset ownership raises tax questions — livestock profit, stamp duty, capital gains tax, GST, fringe benefits tax and gifting. The rules are detailed and change, so specialist advice matters. Points often relevant to farming families:

• Primary producers may be able to claim a stamp duty exemption or concession on transferring the family farm to the next generation — generous but technical, and not available to other businesses. Check the current rules with the relevant state revenue office.
• Small business CGT concessions can substantially reduce, or even eliminate, capital gains tax on the sale of an active business asset. The ATO maintains the current conditions and limits.
• Social security (and how it interacts with trusts) is complex and changes regularly — get specialist advice, including from Services Australia.
• Insurance covers contingencies such as the death or illness of a key person, helping the business continue and protecting partners and family. Understand what is covered, what is excluded, and any limits — cover commonly includes life, trauma, income protection, workers compensation, and fire, flood and tempest.