The balancing act of succession planning

CommBank’s annual breakfast panel session held at Farm World, Victoria’s premier agri field day, tackled the complex yet important issue of succession planning in agriculture. A panel of local, insightful experts shared their experiences when it comes to managing this significant transition for a farm business.

22 March 2024

Succession planning can be a complex issue to tackle for many farming families, with much at stake. It involves implementing a plan to manage and divide both farming, and non-farming assets ensuring fairness for family members pursuing avenues off farm.

CommBank has been supporting regional and agribusinesses for over 100 years. Our longstanding relationships with farmers span generations and encompass diverse sectors. This gives us a deep understanding of agribusinesses and the challenges that go into farming, including succession planning.

CommBank Agribusiness Executive based in Warragul, Jacob De Klerk, says that when the time comes to talk about succession planning for the farm, it’s imperative you have a clear understanding of the business’s financial strength.

“One of the first things for us as a bank in this process, is to understand if the farm is financially strong enough to back these decisions that can benefit the entire family. Are they in a position to invest off farm or diversify income streams? It’s not so much about how they’re going to transfer wealth, but how are they going to manage the wealth so that it’s viable to sustain future generations.”

Collaboration and co-design from the start

CommBank customer Courtney Ferguson, a mixed beef, sheep and cropping farmer from Sale, Victoria, says in her family, they’ve always had an open conversation around farm succession.

“My parents never pushed me into being involved with the farm, but I was always interested in playing a key role. So I’ve had a seat at the table from a young age, which has really helped make the process a whole lot easier, and it’s been more of a planned transition rather than an immediate handover,” she says. “It also means that we’ve had to work together to get the farm to where it is today.

“The success of our transition comes down to collaboration and co-designing the business structure. We have it setup so that we have more than just the one income stream from the farm to rely on. We’ve diversified into other ventures, like a construction business, and recruitment agency, and we’re looking at diversified opportunities as well. We’re not just reliant on the success of the farm; and for my siblings who aren’t involved in the farm, or for my children or their children who don’t want to be a part of it, we have other ways for income to be generated and to hand down something of value to them,” Courtney says.

People on stage at a forum

Diversification as a strategy

For nearly 25 years, Margaret Willett has been practicing law with a primary focus on succession and estate planning with small business owners, farmers, their families, and retirees. She adds that diversifying farm income streams is something she sees a lot of her farming clients focusing on in more recent years.

“It used to be the case that every cent a farmer earnt just went back into the farm, meaning they often didn’t manage to build up assets or revenue outside of their core farming interests. Now we’re seeing a much more balanced approach, with many looking at off farm investment, which, in turn gives them flexibility to suit all members of the family when planning an inheritance,” Margaret says.

Striking the right balance

Matt Harms is an agribusiness consultant with over 15 years’ experience consulting to farming families on their succession plans. He says a common flaw when it comes to succession planning is not differentiating the business side from the family side of the farm.

“I have three key focus areas that help make this process a lot easier. Firstly, communication. I’ve seen so many succession planning sessions turn sour as there has been poor or minimal communication, so it’s really vital to involve all family members and anyone in your wider network who needs to play a part,” Matt says.

“Second, is making sure you’ve left enough time to work everything through. I’ve had clients working through plans for over five years, so it can be a long process. There are different assets and scenarios to work through, and people to involve, so the more time you have, the smoother it can be.

“And finally, don’t forget the boring, structural stuff. You have to talk through how the business will be set up. Will it be a share farming agreement, or a unit, or a family trust? How many people are involved and how is it split?  Here you need all those key stakeholders, plus your advisors, including consultants, accountants, lawyers and bankers to make sure every base is covered.”

CommBank, supporting farmers throughout the generations

Jacob adds that CommBank plays a unique role in this process when working with longstanding agribusiness customers.

“For some of our customers, we’ve been working with their family and their farm across three or four generations, so we have a solid understanding of the business structure. This is where we can play a key role in working closely with families and their advisors to help families achieve their financial goals when the time comes to talk about their succession plan.”

Managing the transition of farming assets for the next generation needs a multifaceted approach, ensuring that the right people have a seat at the table to guarantee a successful outcome. 

Talk to your CommBank Regional and Agribusiness Specialist today if you’re looking at how to achieve your financial goals on your succession planning journey

Things you should know

  • This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information. The information in this article and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its publication but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made in this article.  

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