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#033 - What The Budget Means For Graziers · Dollars In The Dirt

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  Federal budget has dropped and there are some changes every grazier needs
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  to understand before they affect their operation. Most farmers are
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  focused on cattle prices and rainfall right now, not government policy.
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  But the decision being made in Canberra around capital gains tax, trust
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  structures, could have a direct impact on your ability to expand, restructure
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  or hand the farm to the next generation. After helping hundreds of
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  farmers secure over a billion dollars in finance, I can tell you
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  the operators who come out ahead aren't the ones who react to these
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  changes. They're the ones that have already structured correctly before
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  the changes hit. So in this video, I'm going to break down what the latest budget
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  means for graziers, what you need to watch out for, and how to make
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  sure your finance structure keeps you ahead of it. The first thing we need to
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  look at is the reality of the latest budget announcements. From
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  what you're seeing, this appears to be more of a tax grab than a genuine
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  tax reform. The government is looking for revenue, and they're looking
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  closely at structures that hold wealth in this country. The primary target
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  right now is trusts, which is the absolute backbone of almost
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  every Australian family farming operation. Trusts have been used
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  for decades, not just for tax distributions, but for asset
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  protection and succession planning. It appears that prime production
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  might be exempt from some of these more aggressive changes relating
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  to trusts. But the reality is rarely that simple. The
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  problem is that modern agricultural businesses are rarely just
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  prime production anymore. Many graziers have diversified their
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  income to protect themselves against drought and market volatility.
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  You might have a core cattle operation, but you might also have
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  a contracting income, a transport operation, perhaps
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  a commercial shed in town that's generating rent. And
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  when you mix the income with other commercial sources within the
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  same trust structure, things can get incredibly messy under
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  the new rules. The ATO doesn't always seem the nuance
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  between a family farm and a corporate investment vehicle. And
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  this creates a massive headache for your accountant, but it also creates
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  a massive headache for your finance broker. When we go into a
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  bank to secure funding for a new property, the banks look at the
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  complexity of your trust structure, and if the new
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  tax rules force you to restructure your entities, that can trigger a
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  review of your existing lending covenants. It can change how
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  the bank can view your servicing capacity, and a tax problem can
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  very quickly become a finance problem. However, the
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  most important piece of advice I can give you right now is
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  until this legislation is finalised, there's not much point losing sleep
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  over it. You can't build a solid financial strategy
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  on rumours, media headlines and a draft proposal. You
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  need to deal with the changes once they actually become legislated and
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  the rules are clear. What you can do right now
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  is ensure that you have the right team in place. You need an accountant who understands
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  the specific nuances of agricultural tax law. You need a
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  lawyer that understands rural succession and a finance broker who
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  understands how the complex debt structures across your entities works.
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  If you have that team communicating with each other, you'll be in the right position
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  to navigate whatever changes actually become law without
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  accidentally blowing up your borrowing capacity in the process. So
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  while we wait for the trust legislation to settle, there's a much bigger issue
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  that's already hitting Grazier's hard, and that's capital gains tax. CGT
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  is becoming a massive issue simply because land values and
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  asset values have climbed so aggressively over the last decade. We're
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  seeing rural businesses across Queensland that are incredibly
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  asset rich but cash poor, and your property might have doubled
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  or even tripled in value on paper, but your operating profit margin might
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  still be tight because your input costs have risen just as fast.
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  And the trap is that breeding livestock, farmland, buildings and
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  other long-held assets can create a significant CGT
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  exposure when they're sold or transferred. And this is
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  especially critical for the older generation that's looking to retire and
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  pass the property to their children. The government has talked
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  about reverting to the old system of indexation for the CGT, but
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  they have seemed to have forgotten to include the averaging provision that
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  used to come with it. This means that if you sell or transfer a
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  major asset, the entire capital gain could be dumped into
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  a single financial year, pushing you into the highest possible tax
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  bracket. This tax setting directly
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  affects your ability to make commercial decisions. It affects whether
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  you decide to buy the block next door, whether you decide to scale up
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  your breeder herd, or whether you decide it's time to step back and hand over to
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  the next generation. And if the tax bill on a transfer is
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  too high, families are often forced to sell the asset entirely
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  just to pay the ATO. And that destroys your family legacy in
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  the process. We've seen families forced to sell core
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  breeding or subdivide prime grazing land simply
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  to cover a tax bill triggered by a succession handover. And
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  the biggest risk with these budget changes and tax implications isn't
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  making the wrong move, it's making no move at all. When
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  producers see complex tax changes on the horizon, the
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  natural instinct is to freeze, stop buying land, they
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  delay succession talks and they often hold off on
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  major infrastructure investments. They decide to wait
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  and see what happens and they put the business in a holding pattern. But
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  doing nothing is actually a highly aggressive financial decision while
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  you're waiting for the tax dust to settle. The
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  market is moving, neighbouring properties are being sold to corporate
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  buyers who aren't waiting around, and cattle prices are fluctuating, interest
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  rates are shifting, and by freezing your operation, you're
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  actively losing ground to the producers who are continuing to scale
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  and adapt. The opportunity cost of waiting is
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  often far higher than the cost of moving forward. This
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  is why having a proactive finance strategy is so critical. You
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  can control what the government does with capital gains tax and or trust
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  structures, but you can't control your balance sheet. You
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  can control your liquidity and you can ensure that your debt is structured in
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  a way that allows you to pivot quickly when the rules do change. And
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  a good broker just doesn't help you react to the budget. We
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  help you build a financial fortress that can withstand whatever the
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  ATO throws at it. So you can keep focusing on producing beef and growing
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  your legacy. If you're looking at your current structure and wondering how a property purchase
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  or a succession handover is going to impact your borrowing capacity, that's
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  exactly what I can help with. Book a free call with me and
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  we'll work out the right finance structure for your situation. The
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  call link's in the description. Structuring for flexibility, and
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  this is where a careful record keeping and business structure matter
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  long before a sale or transfer happens. You need to ask yourself, right
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  now, does the structure of your business serve as the best vehicle
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  going forward? If there are major changes to the tax system,
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  and if the answer is no, or if you aren't sure, you need to
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  start looking at your options immediately. This is where a finance broker adds
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  real value to your conversation. My job isn't to give a tax advice, That's
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  your accountant's job. My job is to help you think through how your debt, equity
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  and borrowing capacity interact with your asset growth and
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  your tax obligations. We want to ensure you're not
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  making a major business decision under tax pressure alone. A
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  decision purely to avoid tax is almost always a
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  bad commercial decision. We help owners plan around major
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  transactions before they become urgent. And if you know a succession event
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  is coming in the next five years, we can start by structuring the
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  finance now so that business retains flexibility. We
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  might look at releasing equity from your farm today to farm off-farm investments
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  for the retiring generation, perhaps buying a
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  commercial property in a town or building a share portfolio. This
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  reduces the need for a massive tax-heavy lump sum payout
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  from a farm's cash flow later when the actual handover occurs.
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  It smooths out the capital transfer and protects the core agricultural
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  asset. We work alongside your accountant, your
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  legal advisor, to understand how lending, equity release,
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  succession-style transitions affect your balance sheet. And
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  the accountant will tell you what the tax bill will look like on paper. My
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  job is to tell you what the business can actually carry in real cash flow. I
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  translate the accountant's tax strategy into a finance strategy that
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  the bank will actually approve. By structuring the debt
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  correctly, We can often provide liquidity needed
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  to manage tax liabilities without forcing the sale of
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  core income-producing assets. We can set up facilities that
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  give you the headroom to absorb a tax hit while you're still having the
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  capital to buy cattle when the market drops or
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  buy feed when it stops raining. Flexibility is the ultimate hedge
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  against government policy changes. And if your debt is structured correctly,
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  you have options. If it isn't, the ATO and the bank will make
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  the decisions for you. Remember guys, rising asset values should
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  be a blessing, not a burden. Don't let an outdated tax
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  rule dictate the future of your family operation. Get your team together,
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  review your structure, and make sure your finance gives you the flexibility to
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  make the right commercial decisions. And if you need help structuring your
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  debt to handle expansion or succession, reach out to Season Finance.
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  And as a broker, this is exactly what I do for my clients. and
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  I'll see you in the next episode. Thanks for tuning into Dollars in the Dirt. If
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  you've got value from today's episode, make sure to subscribe so
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  you never miss the insights you need to grow your business. And if you're ready to stop
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  being just another number to the banks, visit Season Finance via
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  the link in the show notes. Remember to follow us on socials and catch