Getting the right help with succession planning – there’s a lot at stake!

We’ve all heard the war stories about farm succession planning gone wrong! Farms being sold, family members who rarely speak, children denied those all-important relationships with grandparents or cousins, family members missing in action from the traditional Christmas and Easter get togethers, and the list goes on…

However, it doesn’t have to be that way and it’s possible to manage the succession process well!

Succussion is a balancing act that requires open mindedness, planning and communication to allow the successful transition of the farm business and farm assets from the older generation to the younger generation with minimal disruption to family relationships and the ongoing viability of the business. Succession planning is about coming to an agreement about how the older generation will meet their needs into the future, including their desire for purpose and security, balanced against the needs of the business and the younger generations dreams and aspirations.

So, who do you speak to?

The solution for many farming families is to engage a professional to help with appropriate communication and planning for succession.

An independent person such as a Rural Financial Counsellor (RFC) can have those all-important initial discussions to educate you about succession planning so that you understand what is involved, how to navigate the process and which professionals to engage to help you with your succession plan. Whilst they can’t facilitate the succession planning process for you from start to end, they can help you to manage the process. Rural Financial Counsellors can also be involved in reviewing the past performance of the enterprise, building financial skill sets in the family and road testing options through cash flows and enterprise budgets.

Depending on the complexity of your family situation, you may want to engage a specialist succession planning facilitator to help you. You will also need to engage a range of other professionals to deal with your succession plan as specialist advice is required and no one person is qualified or licensed to assist with all the advice you will need.

Some succession planning professionals focus predominantly on the legal, financial and taxation implications of succession for the on-farm family members only with less emphasis on managing those all-important family relationships. Other facilitators will focus heavily on the communication and relationships, including those with the in-laws, guiding the entire family through a process to arrive at a family generated solution but leaving the more technical legal, financial and taxation implications to other qualified professionals.

Families engage specialist succession planning facilitators to help guide them through succession planning and provide a safe environment for each family member to voice their expectations and concerns. It’s important to find the right facilitator for your family and one who is experienced in this complex area. Your facilitator really needs a combination of skills and knowledge spanning technical, strategic and more importantly great listening and communication skills as succession planning discussions can often trigger emotional reactions and your facilitator needs to be able to respond appropriately. A good facilitator should be comfortable dealing with conflict and the family’s discomfort with difficult conversations.

The facilitator’s role is to help all family members communicate appropriately and to challenge their thinking with the aim of working through the issues and finding solutions. They effectively hold up a mirror to the family and appropriately manage the rolling of eyes (!) and any careless or insensitive comments that are often made along the way. For some families this may be the first time that inappropriate communication or unacceptable behavior has ever been challenged and that can trigger emotional reactions too.

Long term issues can surface when you put family members around a table to discuss succession. These issues can include long-held attitudes to succession, family history and experiences of succession, a family’s ability to communicate effectively and not sweep the tricky conversations under the carpet, power struggles and a competitive environment with children or other family members, issues around sibling rivalry and unfair treatment, self-esteem, and mental health issues.

When working with a succession planning facilitator the first step in the process is generally for all family members to complete a detailed questionnaire. This is followed by a series of individual family meetings conducted online or in person and a business viability report is prepared. Everyone then comes together for a one- or two-day family meeting to learn about communication and succession, answer a series of questions and listen to each other, review the viability of the business and brainstorm ideas and solutions for a workable succession plan. At the end of the process the facilitator prepares an in-principle agreement and action plan based on the opportunities and solutions that the family has identified.

The next step is to obtain specialist advice in relation to the agreement. It’s important that the various professionals you engage are licensed, experienced, and appropriately qualified to provide advice in the following areas:

• Legal – business structures, risk management and asset protection strategies, ownership options, legal contracts, Buy Sell agreements, Binding Financial Agreements, Deeds of Family Agreement etc
• Estate planning – wills, Testamentary Trusts, Enduring Powers of Attorney, Enduring Guardianships, Guardian nominations
• Taxation – management accounting advice, tax minimization, Capital Gains Tax and eligibility for the CGT small business concessions, pros, and cons of transferring an asset in lifetime versus transferring on death, Stamp duty and intergenerational rules, Land tax rules, tax implications of new business structures and dissolving old partnerships/Companies etc, recommended ownership structures
• Financial Planning and Retirement Planning – investment advice, superannuation and SMSF advice, strategic planning, tax minimization, Centrelink strategies, age care strategies etc
• Insurance – life and Disability insurance, buy sell agreements, general insurance
• Farm Consultants – production advice, agronomy, and livestock advice
• Personal counselling – may also be required for some family members.

Remember that each professional will come with their specialist hat on and will view the family’s succession plan from their own perspective. They may not necessarily agree with the plan, but they need to be respectful of the fact that the plan was created by the family to suit their unique needs. A fundamental blockage for families often comes when other professionals place their own beliefs ahead of the needs and wants of the family. It’s important that all professionals respect the family’s solution and work as a team with them rather than criticising or diminishing the process that the family has been though. There is no one size fits all approach to succession planning as each family’s situation is unique.

Interestingly when the succession planning process fails, some families look to blame anyone but themselves and some will blame the facilitator or their professional advisers rather than accepting responsibility for their own communication and behavior. Communication is sometimes poor in families which leads to potential conflict that may be either passive, such as withdrawing access to grandchildren, or aggressive and abusive with disrespectful language and behavior.

Getting a succession plan in place takes significant time and effort and a need to balance competing interests. The key element for successful succession planning is a functional family with respectful relationships and good communication skills, but if you don’t have these don’t be put off. It’s important to build your team (your family and your advisers) and the resources you need to achieve the end game… With rapidly appreciating property values it’s going to get even more challenging to achieve this aim into the future.

Start the process early, make sure expectations are realistic, consider all parties fairly – including parents, farming children, non-farming children and in-laws, treat everyone respectfully and approach the process with appreciation rather than entitlement.

The NSW Government is continuing to support regional communities, businesses and workers experiencing the flow-on effects of the drought through a new regional economic stimulus package. During a visit to Coolamon in the State’s southwest today, Premier Gladys Berejiklian announced the upcoming State Budget would include $355 million to extend emergency drought support for farmers and funding to fast track investment in regional infrastructure.

The funding brings the NSW Government’s investment in drought support to more than $1.8 billion.

Ms Berejiklian said the package will fund many critical town water projects as well as other shovel-ready infrastructure projects that will stimulate local economies.

“The impact of this drought has spread quickly off farm and is now being felt by businesses and households in towns and cities across regional NSW,” Ms Berejiklian said.

“When farmers can’t contract tradies and other workers, there is a flow on effect felt throughout local businesses such as cafes and local stores. This funding package will support these rural communities in their time of need.”

Examples of shovel ready projects that could be funded by the stimulus package include regional airport upgrades, activation of industrial lands and CBD revitalisation projects.

Ms Berejiklian was joined in Coolamon by Deputy Premier John Barilaro, Treasurer Dominic Perrottet and Minister for Agriculture Adam Marshall.

Mr Barilaro said the NSW Government was continuing to stand shoulder to shoulder with farmers and their communities battling the drought.

“The lack of rain on farm is having a devastating flow on effect in regional businesses,” Mr Barilaro said.

“Every dollar spent by farmers at their local store helps keep someone employed in that business and a family in town. We recognise that in order to keep businesses open and jobs in town, the Government needs to fast track our investment in local infrastructure.”

Mr Perrottet said the package would boost water security for local communities and provide support for farmers and their local communities.

“The best drought package for regional NSW is rain, but until the skies open we will stand by communities that are doing it tough,” Mr Perrottet said.

“We will always back our farmers and rural communities as they continue to deal with this terrible drought.”

Mr Marshall said the assistance would allow farmers to cut the cost of farming fees and charges, continue to use transport subsidies and would provide funding for emergency water carting.

“Our farmers are doing it incredibly tough and that’s why we’re directing additional funds to help reduce cost of living pressures, drought-proof properties and transport stock and fodder,” Mr Marshall said.

“While what is needed most is simply more rainfall I’m confident this package will help alleviate the burden associated with one of the worst droughts in living memory.”

Under today’s announcement, $170 million has been reserved for a special purpose Drought Infrastructure Package, including:

• Up to $120 million to fast track identified major infrastructure projects;
• $30 million on new groundwater supply for Dubbo;
• $8.2 million construction of second water storage at Nyngan
• $2.2 million to augment bore water supply at Coonabarabran;
• $2 million for Albert Priest Channel critical maintenance (Nyngan and Cobar); and
• $1.97 million towards the Coolamon Industrial Estate development.

An additional $185 million in Budget funding will go towards on-farm drought support measures, including:

• $70 million for transport subsidies (stock, fodder and water);
• $50 million to waive Local Land Services rates;
• $30 million to waive fixed charges for NSW Water Licences;
• $15 million for emergency water carting; and
• $10 million to waive interest charges for Farm Innovation Fund loans.

For further information about NSW Government drought support measures, visit www.droughthub.nsw.gov.au

Australian farming families and communities are some of the most productive and innovative in the world, but they work and live in a highly variable environment. This can sometimes lead to significant financial hardship and uncertainty. Recent natural disasters and the impact of COVID-19 have led to increased revenue volatility for many of you.

Australia relies on farmers like you and the contributions you make to our everyday lives. It is important you receive the financial support you need during times of hardship, regardless of how it was caused.  

The Australian Government has introduced further improvements to modernise and streamline Farm Household Allowance (FHA) to help you assess your situation and plan a way forward to long–term financial security.

The assets test has been simplified and the net assets threshold has increased to $5.5 million.

Fortnightly payments have been simplified to the maximum rate for all customers with income under the thresholds. This will provide certainty about payments. Combined with the current farm business loss measure introduced in December 2019, this new change means that you can have substantial off-farm income before you lose access to payment.  

You can also now ask farm consultants and Rural Financial Counsellors to complete the Farm Financial Assessment on your behalf—making it easier to get advice on improving your business.

To help eligible households access training, develop skills and receive professional advice, the activity supplement has also been increased to $10,000. Activities that boost income, either on or off-farm, can be considered.

In addition to these updates, from 1 July 2020, the requirement for business income reconciliation (BIR) will be removed to simplify your payment.

These improvements, and the recent changes to streamline the application process finalise the government’s response to the 2018 farmer–led review of the FHA.

The FHA has already helped more than 14,900 farmers and their partners and has delivered more than $459 million to financially stressed households. This in turn helps rural communities by keeping money moving in the economy.

Find out today if you are eligible. Visit servicesaustralia.gov.au/farmhouseholdallowance

Chairs Report

In the last financial year we have:

Secured a new 3 year funding contract for our existing service area from the Federal Government (National Recovery and Resilience Agency)

Secured a contract for an additional service area, being the NSW Central Region service area

Continued providing financial counselling to small businesses in rural and regional NSW under a pilot project from the Federal Government

Welcomed two new members to the board, now totalling 7. A warm welcome to Fiona Jolly and Anita Kemp

NEW CONTRACT

We submitted a response to the government’s call for tender late in 2020 and the result was announced at the end of the third quarter, which left less time than had been planned to reestablish our existing service area and absorb the new service area of the NSW Central Region service. However, our executive team had plans in waiting and were able to push the ‘green button’ on the appropriate plan. To their credit, the transition to the new company has gone with few hiccups, given we have a vastly enlarged service area covering both rural and small business financial counselling. They are to be congratulated. Our service area will now extend from Tibooburra in the north-west of the state to Eden in the southeast, from the border of SA to the coast south of Sydney – in other words 78% of NSW.

SMALL BUSINESS FINANCIAL COUNSELLING

This pilot project has been of great benefit to many small businesses in rural and regional NSW, as they struggle with the economic downturn brought on by drought, bushfires, floods, and COVID-19. The original concept was to extend the same services we provide to farmers, but to those small businesses in rural and regional towns that are also feeling the pinch, and this has worked very well as evidenced by the REWiRE program results and testimonials we have received from relieved clients. We never fail to remind stakeholders that what constitutes a small business (less than 20 employees) might well be a small business in a metropolitan context, but in rural and regional areas may well be the largest employer in town. The knock-on effect of business failures in these small towns can be large in terms of economy, employment, service availability, confidence, and wellbeing. Our Business Coaches, who live in these communities, help their communities survive and put plans in place to thrive in these challenging times.

NEW BOARD MEMBERS

We welcome Anita Kemp (Wagga Wagga) and Fiona Jolly (Queanbeyan) to our board. Our board members are chosen to help us maintain a matrix of skills and a geographic representation across our area. Our board members serve for three terms of three years each plus one year, making ten years in all. This refreshes the board and their skills over time, keeping the RFCS ready to meet the challenges of a changing business, social and agricultural landscape.

THE NRRA

The National Recovery and Resilience Agency under the Hon. Shane Stone has been established to help communities recover from natural disasters such as drought, bushfires, and COVID-19. More importantly perhaps, one of its aims is to help build resilience and preparedness across our rural and regional communities. The 10 Rural Financial Counselling Service regions nationally, will report to the NRRA as the agency delivering RFCS funding from 1 July 2021.