Farmers looking to retire or play a less active role in the family business have a special set of tax considerations. It's a good idea to look at the solutions and opportunities provided by different retirement plans.

A tax-smart retirement plan

Every year when tax time rolls around, any farmers considering retiring from work are encouraged to investigate the most effective tax solutions and their longer term wealth creation. According to Bill Adams, General Manager at Next Rural, farmers planning to retire or play a less active role in the family business have a special set of tax considerations.

“The discussion with your banker and accountant should include superannuation and farm management deposits (FMDs),” he says. “Superannuation is fantastic for assisting farmers with business transition, reduced responsibilities on-farm and eventual retirement. It's also a very effective tax management tool that offers a tax-free position on investment returns and income when individuals reach 60 years of age, yet it's often underused. If the business has some extra money in a maturing FMD account, it will be treated as income in the financial year it’s withdrawn. The taxation impact can be offset with a smart superannuation strategy."

Adams points out that many people on the land tend to keep working well into their 60s.

"Even if you start contributing to superannuation at 55 you can put aside a decent nest egg by the time you reach 65, and at the same time take advantage of the taxation benefits," he says.

Self-managed super funds

A self-managed super fund (SMSF) is one option to consider.

"Farming families who have the time and expertise and want greater control over their superannuation investment can find that an SMSF suits their purpose," Adams says. "This type of fund allows members to invest in most asset classes such as shares, cash or managed funds, and also directly into property. Many farmers have purchased broadacre country via their SMSF, which allows them to earn income from that asset in a tax-effective structure."

Adams adds that an SMSF can also assist with succession and your retirement plan.

“However, SMSFs are not for everyone and I strongly recommend that anyone considering this option gets retirement advice from their financial planner so they fully understand their responsibilities,” he says.

NAB has a team of Agribusiness Financial Planners specialists that work closely with Agribusiness Bankers who can help you review your financial situation and forecast for the year ahead so you can make the most tax effective decisions.

Important information

The information contained in this article is correct as of July 2018 and is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.

Want to keep exploring?

Other business moments

How to save for retirement throughout your life

Make sure your retirement plan is right on track for your age and the stage you've reached in your business.

Retirement planning for small business owners

Whether you want to sell your business or keep it in the family, early retirement planning is your key to success.

Valuing a business: find out what it's worth

What’s your business worth? Learn more about what influences business viability and company valuation methods.

After more?

NAB Retirement Account

An everyday account that earns interest. Easy access to your money with no monthly account fees.

Investments

Looking to grow wealth through investment? We can help with different investment strategies and financial planning advice.

Savings accounts

Starting a business or looking to expand? Our range of business loans, overdrafts, equipment and trade finance options can help you achieve your goals.

Let's talk

We're ready to help you

Request a call back
Call 13 10 12

Mon-Fri 8am - 8pm (AEST/AEDT)
Sat-Sun 9am - 6pm (AEST/AEDT)

Talk to an expert