Part 3: Leasing
This week on the Farm Table we are exploring the topic of leasing farmland.
In our final post, we provide a simple checklist for farm leasing and a round up of some handy tools available to you.
This includes assessing the property, doing a site inspection and due diligence. Refer to People in Dairy’s Farm Scorecard for Due Diligence for a handy template to assist in this process.
Understand the taxation impacts of leasing
Leasing land has taxation impacts for both lessor and lessee. These include:
- For the landowner: may no long be able to claim primary production tax advantages, may lose access to CGT and small business concessions.
- For the tenant: lease expenses are fulling tax deductible.
Prepare and formalise a lease agreement
As noted in GRDC’s Leasing and Share Farming Land Fact Sheet, “The faintest ink is better than the fondest memory’: Always document share farming and leasing agreements.” It is advised to always have a written agreement that is discussed, clarified and agreed by both the landholder and tenant.
The lease agreement includes details of the land to be leased, identification of the partners to agreement, term of agreements (and options if applicable), rent and rental period, landowner’s obligations, tenant obligations, conflict resolution process, any special conditions, property access, land stewardship expectation, insurance etc. Refer to the GRDC Factsheet for a handy checklist at to AgriFutures for a sample lease agreement.
And finally, a round-up of handy online resources to assist you in your leasing journey:
Leasing and Share Farming Land Fact Sheet (GRDC, 2014)
The fact sheet outlines the importance of preparing a budget, ensuring you can access sufficient working capital before entering into a lease agreement, understanding your tax implications, valuing the lease and having a written lease agreement. A useful leasing and share farming checklist provides a guide to understanding the details of the land, timing, financing and legal processes.
Leasing Dairy Assets Resource Pack (People in Dairy, 2016)
This comprehensive and user-friendly toolkit contains:
- Section 1: Leasing a dairy property (4 tools)
- Tool A: assess a range of factors and do due diligence using the Farm Scorecard
- Tool B: check the arrangement is fair & affordable with the Leasing Property calculator
- Tool C: use the Checklist for arranging a lease(Word) to discuss the key elements involved
- Tool D (3 docs): prepare a draft with the property lease agreement template – standard clauses
- Section 2: Leasing dairy cows (3 tools)
- Tool E: assess a range of factors and do due diligence using the Cows Scorecard
- Tool F: use the Checklist for arranging lease of dairy cows
- Tool G (3 docs): prepare a draft of the cow lease agreement template- standard clauses
Successful land leasing in Australia (AgriFutures Australia, 2011)
This RIRDC report helps broadacre farmers make decisions concerning the leasing of land. The paper outlines the financial and environmental benefits of business expansion through leasing for both lessees and lessors. Huge document that covers leasing from start to finish. Includes some case studies, global learning and agreement examples.
For this and a whole range of leasing resources, please head over to the Farm Table library.
Refer to our previous posts: