We find ourselves in an uncertain economic (and weather) climate involving highs and lows in terms of political standings, severe droughts and floods (the latter thanks to Cyclone Debbie), high cattle and commodity prices, and a return to high land values, all of which affect the back bone of our great country, the primary producer.
On top of this we are seeing an unprecedented transfer of wealth through the baby boomer generation and changes in attitude of both younger and older generations in terms of their succession planning, with it recognised that the older generations want to retire comfortably and the younger generation want to seize the opportunity.
There are extraordinary opportunities for primary producers to take advantage of tax and duty concessions as part of their succession (and retirement) planning including the small business capital gains tax concessions and other forms of rollover relief available under the Income Tax Assessment Act as well as the abolishment of stamp duty on the transfer of primary production business property (including water licences) under the Queensland Duties Act where the property has a mortgage or consideration is intended to pass between generations.
Coupled with this is the release by the Queensland Government, through QRAA, for primary producers to apply for a Farm Management Grant, which will see the reimbursement of eligible professional advisor costs incurred by primary producers in seeking advice when undertaking their succession planning for transferring an interest in a primary production enterprise to a relative of a primary producer (noting that it does not include the costs of implementation).
The Farm Management Grant provides a rebate for up to 50% of fees paid for advice, at a maximum of $2,500 for an applicant each financial year. Obtaining legal advice from our firm around your succession planning will meet the criteria of eligible advice. The application for reimbursement and even pre-approval of the grants can be applied for online at https://applyonline.qraa.qld.gov.au.
For most primary producers, there is often an inherent link between family and their businesses. Given the intricacy of family relationships, formally recording your succession plan has many benefits, in that they:
- formally record the plan and, as much as possible, provide certainty of outcome;
- are good corporate governance in that they provide practical answers to decision-making and the goals of individuals and businesses; and
- if there is a threat of future litigation, including risks of family provision applications, they are evidence of recorded intentions and can help to preserve ensure that assets are passed as you intended.
Too often we see family businesses reliant upon the old 'bush handshake' in terms of documenting their succession plans. While this may be considered an often unspoken business or personal arrangement, we are seeing that it does not regularly work as well in reality as it does in theory because an agreement 'in principle' is simply not as firm as the hand it's gripped with.
There are no one-fits-all documents when recording and implementing your succession plan (and this list is not exhaustive) but it can include:
- a heads of agreement;
- amendments to constitutions and trust deeds;
- shareholder and partnership agreements;
- certain option and buy/sell agreements;
- property transfers and other forms of property agreements or dealings including leases, licensing, agistment and share farming agreements;
- binding financial agreements; and
- wills, enduring powers of attorney and nominations to deal with any superannuation.
Most of the documents we have listed could be likened to a form of insurance, whereby once they are in place it provides certainty of expectation including by explicitly defining who, when and how a business and property owned individually or through other entities (including land) may be taken over.
At the end of the day, it is hoped that by undertaking your 'plan', you are improving the commercial nature of your business and supporting family members along the way.
McCullough Robertson Lawyers recognise and understand the personal, commercial and agricultural needs and objectives of primary producers and their families and can offer expert advice on succession planning, asset protection and taxation and structuring issues.
