Proceedings

The Farm Family And Their Farm Business: A Multidisciplinary, But Potentially Explosive Mix Of Business, Legal Ownership And Family Aspects.

The family farm is a complex interaction overtime between the three major or macro components; the farm business, ownership and the farm family. Failure by the farm family to understand or appreciate the complexity of the interaction or be
aware of the potential effects each components may have on each other may well result in less than optimal use of the resources available. Inheritance can turn a viable family farm into a non-viable family farm, ‘overnight’.

The Australian family farm is a very large investment, on average, of around AUD $1 to $1.5 million, yet the family focus is primarily farming, rather than on the provision of cash to satisfy family needs. The farm family ‘accommodates’ to the farms
cash output and at times off farm income is a necessity to support or supplement the farm income. Coupled with this situation, ownership of land, the basis of family farming, creates a paradox for many farm families, as land has two value systems; one during the owners life time to earn a ‘living’ (historical cost); and on death, as an asset for distributing to other family members
as an inheritance (current cost). It is this dual use of ownership that creates the paradox. In today’s legal environment parents are concerned about how to be fair or to provide for their children equally. The farm is usually the parents only/major asset
and the child, who takes over or ‘inherits’ the family farm pays out their siblings their share of ‘inheritance’, this in effect is
‘buying the family farm each generation’ and significantly affects farm viability. Inheritance undermines farm business sustainability and competitiveness. The family farm needs to grow to keep up with inflation and technological change, but this
only increases the inheritance problem.

Traditionally, each of these three major components have been serviced by separate and specialised service providers and at times the advice provided for one component, may be dysfunctional to one or both of the other major components. There is
thus a need for a macro generalist to help overcome the shortcomings of the present specialist advice system provided farm families.

A number of farm family members were asked to evaluate and rate a number of options and ideas, as an alternative to the inheritance paradox, which would provide a basis for growth and building on what the parents had built. The No. 1 rating was
separating the family farm into the components of; the farm business; the ownership structure; and the farm family. Most of the options/ideas were new to the participants and the comment was made many times, that there was a lack of information
available to assist farm families with their business and family issues and that they do not know what questions to ask. This research has significant implications for farm service providers. Who is servicing who?

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Author(s): Tually, Geoffrey G.

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Organizations(s): Institute of Land and Food Resources, The University of Melbourne