Why are more farming families talking about succession now?

When most of a family's wealth is tied up in one farming asset, deciding what happens next is rarely straightforward. This article examines why the upcoming CGT reforms are encouraging farming families to revisit succession plans and start conversations sooner. 

For many farming families, succession planning is easy to put off. 

There is always another season ahead. Another project to finish. Another year before retirement feels real.

But across regional Australia, many farming families are beginning to have conversations they may have delayed for years. One of the reasons is the upcoming capital gains tax (CGT) reforms due to commence from 1 July 2027. 

While every farm is different, the changes are prompting many landowners to take a fresh look at their long-term plans and ask an important question: if the farm is eventually going to change hands, are we prepared?

As someone who grew up in a farming family and now works closely with agricultural businesses throughout the New England region, Kimberley understands that these discussions are rarely just about business assets. More often, they are about family, legacy and the future of a property that has been built over generations. 

Why is succession planning more complicated for farmers?

Most businesses have assets that can be sold, divided or transferred relatively easily.

A manufacturing business can sell machinery. A professional services firm can transfer equity. A farm is different.

The land is often the business. It may also be the family home and, in many cases, the largest asset a family owns.

This creates unique challenges when one generation begins thinking about stepping back and another begins thinking about stepping up. Conversations are rarely just about ownership. They are also about fairness, financial security and ensuring the farm remains viable for the future. 

Why are the upcoming CGT reforms bringing these conversations forward?

For years, some farming families have assumed they would tackle succession planning when retirement was closer.

The upcoming CGT reforms are encouraging many to start those discussions earlier.

As land values have increased across regional Australia, many farming businesses now hold significant unrealised wealth. Understanding how future tax changes may affect ownership decisions is prompting families to review arrangements that may not have been revisited in years.

Importantly, this does not mean families should rush into major decisions. Rather, it highlights the value of understanding potential implications before important decisions need to be made.

The earlier conversations start, the more time families generally have to consider their options, seek advice and ensure everyone understands the road ahead.

What could this look like in practice?

Example: A farming family in regional Australia

John and Margaret own a mixed grazing property near Walcha. The farm has been in the family for more than 40 years and is now worth $8 million. Their son works on the farm full-time and plans to take over the business, while their daughter lives in Newcastle and works outside the agricultural industry.

For years, the family's succession plan was relatively straightforward. The farm would eventually be transferred to their son, who would continue operating the business, while other assets would help provide for their daughter.

With the upcoming CGT reforms due to commence from 1 July 2027, however, the family decides to revisit those plans.

On paper, the family's wealth is largely tied up in a single asset: the farm. While the property is worth $8 million, most of that value is not sitting in a bank account. It is tied up in the land, infrastructure and operation itself.

If John and Margaret wanted to leave each child an equal share of their estate, that could create challenges. Their son may need control of the farm to continue operating it successfully, while their daughter may reasonably expect to share in the value of an asset that has been part of the family for generations.

• If the son inherits the entire farm, is that fair to the daughter?
• If the daughter is given a 50% ownership interest, how will decisions about the farm be made in the future?
• If the son is expected to buy out his sister, where does that money come from? The farm may be worth $8 million, but it may not generate enough cash flow to support a multi-million-dollar payout without taking on significant debt.

The family then begins exploring different possibilities.

• Could the son gradually purchase additional ownership interests over time?
• Could some non-core assets be sold to create a pool of funds for the daughter?
• Should ownership of the land remain separate from the farming operation?
• Do Mum and Dad need to retain some assets themselves to ensure they have enough income and security in retirement?

And perhaps the hardest question of all: what outcome is genuinely fair?  

The ultimate outcome may not change. Their son may still take over the farm, and their daughter may still receive other assets. However, by starting the conversation earlier, the family has more opportunity to understand the implications, consider alternative approaches and make informed decisions together.

Who should be involved in succession discussions?

In Kimberley’s experience, the most successful succession discussions are usually the ones that involve everyone who may be impacted by the outcome.  

That may include:

• Parents
• On-farm children
• Off-farm children
• Spouses and partners
• Accountants
• Legal advisers

Not everyone needs to make the decisions, but everyone should understand the reasons behind them.

When people are consulted early and have an opportunity to ask questions, families are often better equipped to navigate complex decisions and avoid misunderstandings later on. There is also a window of opportunity to educate any family members who don’t understand the implications of these decisions.  

What is the biggest risk to successful succession planning?

Many people assume tax or legal structures are the biggest obstacles. More often, the biggest challenge is communication.

Expectations may never have been discussed and as a result assumptions may have been made. Family members may feel they have not been consulted or heard.

By contrast, families that begin conversations early tend to have more time to work through difficult issues, understand different perspectives and move towards an outcome everyone understands.

Frequently asked questions

If one child farms and the others do not, what options exist to achieve an outcome that everyone considers fair?

Fair does not always mean equal. Depending on the family's circumstances, options may include transferring the farming business to the on-farm child while providing other assets, staged payments or different arrangements for off-farm children. The right solution balances the sustainability of the business with the needs of the family.

What happens if a family member wants to leave the farming business after ownership has transitioned?

This is why succession planning should consider future scenarios, not just the initial transfer. Well-structured arrangements can establish how ownership interests will be valued, funded and transferred if circumstances change.

Should separate farming enterprises be consolidated or separated before succession occurs?

There is no one-size-fits-all answer. Some structures may benefit from consolidation, while others may require separation for risk management, ownership or operational reasons. The most appropriate approach depends on the family's objectives and the nature of the business.

How can retiring farmers maintain financial security while allowing the next generation to grow the business?

One of the key goals of succession planning is ensuring the retiring generation can fund their desired lifestyle while supporting the future of the farm. Starting early generally provides more flexibility and more options to balance both objectives.