Cattle in Pasture

Zero Sum Game

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  • Colin Lea, BBus (Ag Comm), BA, GDFP, CFP®

Wealth through Super: Not betting it all on the farm...

"Asset rich and cash flow poor... Farming is a profession of hope... Too much rain, not enough rain... The farmer has to be an optimist or he wouldn’t still be a farmer..."

These are all common sayings associated with farming, and while it is important to recognise that much of the return on capital comes at the end of a farmers working life, for many this isn't the case. Often the best of intentions can be brought undone by mother nature, force majeure events, economic crisis, and counter cyclical commodity cycles.

Which is why the wealth of one of the oldest sayings can never be understated; don't have all your eggs in one basket. Which is where superannuation comes in for agribusiness and farming enterprises as an important wealth creation and wealth preservation tool.

From a wealth creation perspective it's invaluable as you can access the following accumulation tools:

  • Annual concessional contributions ($25,000) for which you can claim a tax deduction, such as making regular employer or end of financial year contributions, handy for offsetting tax on farm management deposits (FMD's).

  • Annual ($100,000) or one-time non concessional contributions (up to $300,000) for when you have excess capital that needs to be directed to a more concessional favourable tax environment (15%).

  • Cascading capital gains tax exemptions to offset tax payable on sale of a business (Basic CGT exemption, Small Business Exemption, 15 year exemption, Retirement Exemption).

  • Receiving of investment income in an SMSF (such as rental or lease payments from a non-related entity).

Invaluable retirement income tools:

  • Provision of a tax free retirement income stream (0% tax on earnings and on pension income)

  • Provision of tax free capital gains (0% tax on assets sold during pension phase which incur a capital gain)

  • Ability to direct death benefit payments to the most concessionally favourable tax environment outcome.

Directing income and earnings to non-farm or business related investment environments such as super is also critical as a wealth preservation tool as it moves these funds to an environment which is beyond the reach of creditors. Why? Because the legislated purpose of superannuation is to provide for a members benefit in retirement, for which a condition of release must be met (which are very stringent).

What experience has taught me however is that many key personnel in Agribusiness and Farming enterprises are usually so busy in doing the doing, that they don't have time to get down in the weeds and understand the important benefits that super can offer, including compounding returns over time. Or, they have a current adviser that doesn't understand or place an importance on superannuation; often to the detriment of their client's long term wealth.

If you'd like to maximise your growth and earnings potential through super to to minimise tax and turbo-charge your longer term returns, please reach out as I would love the opportunity to assist you achieve the business, retirement and lifestyle goals you set.

Cheers, Col


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