People in this phase may be starting to slow down the day-to-day business operations, spending more time on lifestyle and other interests, and thinking about retirement. They may have high levels of responsibility, control and equity in the business and want to transfer the responsibilities to a new management team. Over the years they have accumulated valuable experience and knowledge, which is beneficial to share with younger people. People in this phase could be longer-term management employees, farm owners or family members who have significant responsibilities and equity in the business.
The handover process needs to be planned to ensure a smooth transition in management and control. For example, if there are not people within the farm business who can take on some of the roles of those wishing to step back, then this will be a barrier to change.
People who are motivated to move to management level should have been identified and commenced a training program to develop skills and knowledge suited to a higher degree of responsibility or an ownership role.
Developing and using coaching and mentoring skills to prepare the new management team will facilitate the effective transfer of information, skills and knowledge.
At this stage it is important to review all position descriptions to make sure that changes in roles and responsibilities are effectively documented and clear to everyone. Regular communication, that includes team meetings, is important for monitoring the changes.
People handing over responsibility need to carefully think through the next phase in their lives. Where will they be living? What do they plan to do with their time? They need to assess whether their savings will support them when they retire. It is now that their long-term financial and personal goals should be eventuating.
Some options for consideration for funding the retirement of business owners include:
- maintaining an income producing interest in the farming business through a number of alternatives such as wages, director fees, share farming, leasing, investments in shares or property (off farm);
- pensions and related benefits (Centrelink);
- superannuation and other structures.
Seek help to make the most of Centrelink entitlements
If pensions and related benefits through Centrelink are being considered, be aware that these are subject to asset and income tests. Seek professional advice for the best way to structure your assets so that pension entitlements and benefits are not lost.
A financial planner can help adjust plans as well as help with any Centrelink benefit entitlements. Also consider developing a retirement and estate plan.
The technical aspects of a number of these options are discussed in more detail in the section on Retirement income strategies.
When farm responsibilities start to slow down it is a great time to take up other interests or hobbies that there hasn’t been time for in the past: travelling, spending more time with family, taking up sport, volunteering in the local community.