Agribusiness Perspectives Papers 1997/98

Paper 6/6
ISSN 1442-6951

Putting The Family Back Into The Family Farm

Paper 6 - of a series of 6 papers

Geoff Tually
Senior Lecturer
Institute of Land and Food Resources,
The University of Melbourne
1997

[Paper: 1 | 2 | 3 | 4 | 5 | 6 ]

Planning is about providing focus on how you propose to achieve your broad goals, through a series of shorter term (1 - 5 year) guide lines or specific plans. The previous five (5) papers have focused on various aspects that need to be considered in developing the set of three (3) separate plans for the farm family and their business.

This paper looks at the following three (3) aspects:

• Family plan content;
• Ownership plan content;
• Business plan content.

1. Family Plans (suggested content adjust for specific family situation) Review date ______________

A) Present family goals - write down.

i) Broad goals for family (refer paper 1, page 2)

ii) Specific goals for next five (5) years (compatible with broad goals) for

Parents ________________________________________________________________

Each child (as applicable) __________________________________________________

B) Present and future (next five (5) years) cash needs to achieve specific goals.

Relate/enter these totals to the graph, page 4 paper 1. Any changes to family specific goals needed, following these estimated cash needs calculations for next five (5) years?

C) Will situation.

i) Date of current Will Husband _______________ Executor _______________

Wife _______________ Executor _______________

YES Name NO

ii) Power of attorney - normal o _______ o

enduring o _______ o

iii) Will contents (refer paper 3) - this will directly relate to the Ownership Plan, i.e, whether

land is held as joint tenants / tenants in common, or in a trust or company, life tenancy, shares / units held etc.

_______________________________________________________________________

_______________________________________________________________________

vi) Location of Wills _________________________________________________________

2. Ownership plans (suggested content) Review date ______________

A) Present ownership position (different plan for each separately owned business/assets.)

i) Family farm business.

Ownership structure used.

Business Land (if separate ownership)

a) single proprietorship o o

b) partnership: joint tenancy o o

tenancy in common o o

c) trust discretionary o o

fixed (%___) o o

unit (unit price $___) o o

d) company

Includes family home o o

Family home separate o o

Authorised capital $______ $______

Issued capital $______ $______

Per value of share $______ $______

Different classes of shares _________________________________________________

ii) Where land held separately, what is the relationship of the land to the business?

_______________________________________________________________________

iii) Title deed(s) where located _________________________________________________

iv) Life tenancy involved. Yes o No o . If yes, what effect on ability to change the ownership structure of the business ________________________________________

v) Off farm investments owned within this farm business ownership structure _________________________________________________________________________________

B) Future membership of presently used ownership structure, if changes are to be made.

i) Reasons for change, e.g., allow for growth, recognise off farm income used by farm business, provide children experience. __________________________________________

ii) Who is to be added and how involved.

Member Share (or unit) gifted Share (or unit) purchased. No. or % No. or % price.

_________ _______________ _____________________

iii) The new ownership position

Member Share No. or % Value

_________ ____________ _________

iv) Any capital gains effect of membership change.

C) Change to a different ownership structure.

i) Before changing to a different ownership structure write down reasons for change.

What present structure cannot do, what the new structure can do, i.e. What advantages you seek. ________________________________________________________________

What are the disadvantages of a change _______________________________________

New ownership structure chosen _____________________________________________

ii) The new ownership position

a) business  member share No. or % value

________ ___________ _______

b) land (if separate to business) member share No. or % value

_______ ___________ _______

c) effect of capital gains tax on change in ownership structure.

d) stamp duty involved

Note: May be better to form new ownership structure for a new business venture, rather than change ownership structure of present business.

3. Business Plans (suggested content) Review date __________

Follows the planning frame set out in paper 2. For ON farm plans (separate plan for each business).

A) Present business position (present financial year, e.g., June 30th)

i) Individual / family position

Cash income (both on and off farm) $_______________ available to the family

Family (or individual) cash needs (from $_______________ family plan).

Difference $_______________

ii) Financial position

a) Cash flow statement

Cash income on farm, including share farming $_______________

Off farm income used by business from

Investments $_______________

Wages/salary $_______________

Total Cash Income $_______________

Cash outgo (including drawing info or distribution of profit) $_______________

Cash surplus / deficit $_______________

b) Profit and Loss statement

Total depreciation ___% of total costs $_______________

Profit / Loss (distribution as per ownership plan) $_______________

c) Balance sheet

Total assets $_______________

Total Liabilities $_______________

Long term mortgage $_______________

Equity % of assets ________ $_______________

iii) Machinery / Equipment

Market value $_______________

Depreciated value (depreciation tax worksheet) $_______________

Difference $_______________

Leasing costs $_______________

Repairs / maintenance costs

- as % of total depreciated value ____%

- as % of total farm costs ____%

iv) Livestock (adjust to your enterprise)

Number of stock sold during financial year.

D.S.E rating for your area _____ Your rating _____

Return on assets used: livestock (wool) sold

value of livestock

v) Cropping / pastures

Value of fertiliser used $______ Rate of fertiliser application ______ /ha

Recommended rate for your area and type of soil ______ /ha

Return on fertiliser used:

crops fertilised used (cost) = ____% pastures fertiliser used (cost) = ____%

income from crops value of livestock sold

vi) Land

Area owned

Area leased ______ha. Area sharefarmed ______ha.

Fences boundary length ______ value$________

internal length ______ value$________

Total$_________

Buildings value pre Capital Gains tax $_____________

value post Capital Gains tax $_____________

Total $_____________

Dams and other improvements Total $_____________

vii) Rainfall

Ave _______mm Variation _______mm

Years since last drought _______

Note: 1. Each section will be supported by detailed worksheets, e.g.,

Financial section would have: Cash Flow Statement, Profit & Loss Statement (and associated income and expenditure worksheets), Depreciation Schedule, Profit Distribution Schedule and Balance Sheet.

Livestock section, e.g., Cattle would have Breedings Flow Chart and Breeding Cow Age Inventory, Weight Gain Records, Sales Records.

2. Labels A to H provides a W.I.W.O. value (excluding value of lease).

B. Goals for next five (5) years.

C. Pattern of Management to achieve desired goals.

D. Skills/resources/advice needed.

These three (3) areas would be developed following the planning frame in Paper 2.

The six (6) papers in this series have summarised a number of the ideas outlined and discussed in a homestudy subject 'Estate Planing and Retirement'. This subject is an elective subject in the TAFE nationally accredited 'Rural Business Management' (RBM) course offered from Longerenong College, The University of Melbourne.

Modern estate planning looks to assisting farm families achieve their broad family goals.

Contact: RMB 3000, Horsham, Vic, 3401.
Phone: Work (03) 5362 2222.
Home (03) 5384 7228
Fax: (03) 5362 2213.
Email: g.tually@landfood.unimelb.edu.au 

[Paper: 1 | 2 | 3 | 4 | 5 | 6 ]