The Key to Farm Succession: Planning, Transparency and the Law

How South Australian farming families can protect the farm, respect all their children, and prevent the disputes that destroy both

The Farm Succession Problem

South Australia has some of the most productive agricultural land in the country. Grain farms across the Eyre Peninsula and the Mid North, cattle and sheep stations in the pastoral regions, wine-growing properties in the Barossa, the Clare Valley and McLaren Vale – these are assets of extraordinary value, built across generations by families who worked them through drought, recession and commodity crises.

And yet the transition of those assets from one generation to the next remains one of the most fraught and frequently botched exercises in Australian law.

The tragedy of most farm succession disputes is not that they were unavoidable. It is that they were entirely foreseeable – and entirely preventable.

The key to successful farm succession is honest, transparent, early and thorough planning.

Why Farms Are Different

Farm succession presents challenges that are qualitatively different from those arising in an ordinary estate. A farm is not merely an investment that can be divided equally among children. It is a business: one that depends on continuous operation, established management systems, and in many cases the personal expertise of the persons who have worked it.

Dividing a working farm equally among four children is likely to destroy it. Leaving it intact to the child who has worked it for twenty years may produce a family provision claim from siblings who received nothing. Additional complications include:

• Capital gains tax consequences of intergenerational transfers, including the interaction with the small business CGT concessions
• Stamp duty implications of different succession structures
• The interaction with family law if a farming child separates from a spouse or partner
• Debt structures secured against farm land, and the need to deal with those debts as part of the succession plan

The Role of Transparency

The most important thing a farming family can do – before consulting any lawyer, accountant or financial planner – is talk to each other.

Farm succession disputes almost invariably have their roots in assumptions that were never tested and expectations that were never communicated. A structured family discussion, facilitated by an experienced mediator or lawyer, can surface these assumptions before they calcify into irreconcilable positions.

Remaining wilfully blind to the tensions that will erupt when the farm owner is no longer present to manage them does not make those tensions disappear. It simply ensures they will be more destructive when they eventually surface.

Building the Succession Plan: Legal Structures

The Will

The Will remains the foundation of the succession plan. For a farming estate, a carefully drafted Will should specifically identify and deal with the farm property, appoint an executor with the knowledge and authority to manage the transition, consider whether the farm should pass to a specific child outright or into a testamentary trust, and include explanatory provisions documenting the reasons for any unequal treatment.

Under the Succession Act 2023 (SA), the Court is required to give maximum weight to the testator’s expressed wishes when considering a family provision application. A Will that explains clearly and compassionately why the farm was left intact to one child provides significantly better protection than a Will that simply states the outcome without explanation.

Testamentary Trusts

A testamentary trust is a trust established by a Will, which comes into existence on the testator’s death. For farm succession, testamentary trusts offer several important advantages:

• They allow farm income to be distributed among a class of beneficiaries in a tax-effective manner
• They provide protection against a farming child’s creditors or relationship breakdown
• They can include provisions allowing the trustee to advance capital to a farming beneficiary for farm improvements
• They can be structured to give a farming child effective control of the farm during their lifetime

Inter Vivos Transfers

Many farming families prefer to effect the succession during the farmer’s lifetime. A transfer of farm land or business interests to a family trust or to a farming child may take advantage of the small business CGT concessions available under Division 152 of the Income Tax Assessment Act 1997 (Cth). However, inter vivos transfers must be approached with care, and legal advice is essential.

Family Provision Claims Under the Succession Act 2023 (SA)

Even the most carefully planned farm succession can face a family provision application under the Succession Act 2023 (SA). The Court will consider the financial needs of the applicant, the contribution made by the farming child to the estate (including non-financial contributions), any advances made to any child during the deceased’s lifetime, and the deceased’s expressed wishes.

The Court’s obligation to give maximum weight to the testator’s expressed wishes – a significant reform of the Succession Act 2023 (SA) replacing the former Inheritance (Family Provision) Act 1972 (SA) – provides stronger protection for farm testators who have documented their reasoning.

The Coordinated Professional Team

Farm succession is too complex to be managed by any single professional. Effective farm succession typically requires a succession lawyer with specific experience in farm and rural property transfers, an accountant with expertise in agricultural taxation, a financial planner who can model retirement income needs, and if necessary a mediator or family consultant to address underlying family tensions before legal documents are prepared.

Want to Find Out More?

If you would like further advice about farm succession planning in South Australia, or if you are concerned that your existing farm succession arrangements are not adequate for your family’s circumstances, contact our friendly team.

When it comes to Wills, Probate, Deceased Estates, asset protection and estate planning in Australia, you can trust the oldest law firm in South Australia – Genders & Partners – to guide you through the tough decisions you must make for your family’s future care and welfare.

If you have any questions or would like further information, or a quick phone call to discuss, book a timeslot for a free 15-minute phone consultation.

We can help you to protect yourself and your family. We look forward to being of service.

More Farm and Business Succession Resources

• FAQs
• Videos – Farm and Business Succession
• Articles about Estate Planning for Farmers
• Articles about Testamentary Trusts
• Articles about Family Provision and Contested Estates

All these and many more farm and business succession topics are available for discussion with the oldest law firm in South Australia. Visit our articles page to explore our complete library of estate planning resources.