As tax time rolls around again, farmers considering their retirement are encouraged to investigate the most effective tax solutions and their longer term wealth creation.

NAB head of Agribusiness Financial Planning Bill Adams

According to Bill Adams, Head of Agribusiness Financial Planning at National Australia Bank (NAB), farmers looking to retire or play a less active role in the family business have a special set of considerations at tax time.

The discussion with your banker and accountant should include superannuation and farm management deposits (FMDs),? said Mr Adams.

Superannuation is a fantastic tool for assisting farmers with business transition, reduced responsibilities on-farm and eventual retirement.

It is often underused and a very effective tax management tool that offers a tax-free position on investment returns and income when individuals reach 60 years of age.

If the business has some extra money in a maturing FMD account, if it is withdrawn it will be treated as income in the financial year it?s withdrawn. The taxation impact can be offset with a smart superannuation strategy.

Many people on the land tend to keep working well into their sixties, and 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.

A self-managed super fund (SMSF) is an option used by many of our clients. For those farming families who have the time and expertise, and want greater control over their superannuation investment, then an SMSF suits this purpose.

This type of fund allows members to invest in most asset classes, such as shares, cash or managed funds, but also direct property. Many farmers have purchased broadacre country via their SMSF, allowing them to earn income from that asset in a tax effective structure.

The other consideration and benefit, is that it can assist with succession and retirement planning.

However SMSFs are not for everyone and I strongly recommend that anyone considering this option speak to their financial planner so they fully understand their responsibilities,? said Mr Adams.

Source: NAB. Read more articles from NAB Agribusiness on the NAB’s Agribusiness View page