Red tape, the definition of family, and existing taxes and duties are amongst the most prohibitive processes when it comes to succession planning according to WAFarmers.
Speaking on the last of the six WAFarmers Policy Priorities for the State Election, WAFarmers President Tony York said succession planning was a real issue for all farming, and that current processes could be seen as a disincentive.
“In Western Australia, taxes and duties incurred when farmland transfers from one generation to another causes confusion, angst and is unnecessarily costly, which acts as a disincentive for a property to be transitioned which can result in the younger generation looking for a career path away from agriculture,” Mr York said.
“Many succession plans include the transfer of the family farm to the next generation in parts over many years. However mum and dad, being the transferors, must retire from the farming business on the first land transfer or face a transfer duty liability.
“Some issues also arise surrounding the definition of family – there have been instances where the wife of a brother who was being transferred a land holding did not qualify as a family member, and therefore encountered a transfer liability for half the value of the farm.
“The use of family trusts as asset-holding vehicles for future succession planning purposes is extremely important, as many farmers do not get the right advice in this regard and have mixed assets in the wrong entities, making succession a difficult and expensive exercise when the time comes.”
Mr York said the expiration date was approaching for thousands of discretionary trusts in WA, which have a maximum lifespan of 80 years.
“The assets held in these trusts will need to be moved out raising transfer duty and capital gains tax issues – South Australia has already changed their legislation to extend the life of trusts indefinitely, and WAFarmers urges the Western Australian Government to take similar measures,” he said.
Mr York said further restrictions also applied with regards to capital gains taxes, annual turnovers and the extremely long time it takes for land transfers with free or nominal duty to be processed through Office of State Revenue, and for grants of probate to be approved through the Supreme Court.
He said that the transfer of farmland could be improved by implementing the following:
- Addressing the inability for a farmer to continue in the farming business following transfer of the property to a family member without incurring significant transfer duty costs.
- Amendment to the rules not requiring the transferor to conduct the farming business immediately prior to the transfer of the farm in certain circumstances.
- Amendment extending the definition of family members to include spouses, where there are multiple related transferors.
- Allowing the farming business to be operated through a partnership comprising of non-family members, such as family companies and trusts.
“Succession on a farm is a continual consideration for all farmers, no matter their age or business size, so better early planning will see better future outcomes for the next generation of Western Australian farmers.”