A new report has warned of the “serious risk to survival of farms” without any changes to superannuation, taxation and trust regulation.
The report, Australian Farming Families from Chapman Eastway which advises farming families and Charles Sturt University, say the changes are important with Australian farmers getting older.
Failure to plan for the growing number of retirees could have knock on knock on effects for the economy.
“In fact, over half of Australia’s farm owners are over 55 years old with the majority expecting to retire in the next 15 years,’’ the report says.
“The potential tide of future sales posed by this outflow presents a risk not just to owners themselves, whose valuations could be hurt in the supply of businesses for sale, but to the broader economy.”
The report makes a number of recommendations.
“There should be blanket CGT and stamp duty relief for genuine intergenerational transfers of assets, in context of a wider move towards an “innocent until proven guilty” approach,’’ the report says.
It also recommends expanding CGT rollover relief so that primary production land can be transferred between family trusts. This would address vesting and perpetuity issues associated with the limited lifespan of a trust.
“CGT rollover relief should also be expanded to allow farming business to restructure, to encourage external equity investment to strengthen balance sheets,’’ the report says.
One of the problems identified in the report is that famers and small business owners have low superannuation balances due cash flow restrictions and a desire to reinvest in the business.
To address this, the report recommends expanding small business CGT concessions to allow greater contributions upon an exit event. “The “connected entity” tests for primary producers should be modified to separate farming assets from other assets within the family group,’’ the report says.
The report also recommends changes to superannuation rules to ensure family farms don’t disappear.
“Farming assets should be allowed to generate a “retirement income stream” (i.e. taxed like pensions) even if the assets are held outside of superannuation to encourage the retention of farming assets in the family where moving them into super is prohibitive,’’ the report says.
“The related party acquisition rules should be extended to allow super funds to acquire mortgaged farming land. The rules on financial hardship and super preservation should be relaxed to allow farmers to more easily access and withdraw their super in tough times.”