David French | 26/06/2009 9:29:18 AM

This article was originally published in The Morning Bulletin as an article on the 16th of May 2009.

Not sure how much business is getting done at the Beef Expo, but the makers of the all natural XXXX Gold are certainly doing a roaring trade.

The brief tasteful glimpse of the XXXX Angels on my way out was ample reward for the presentation I gave on Thursday. That presentation focused on opportunities for primary producers to generate off-farm income. As in other businesses, the main issues relate to self sufficiency, risk reduction and tax efficiency.

Self sufficiency means having a plan for retirement, and not having to unduly rely on others. Like ants building a colony, we all have to interact to make things happen. But beyond that is a requirement to fulfill our own destiny. Setting up your financial and business affairs in such a way that your ability for self-direction, your negotiating power and your freedom is increased has to be liberating. The absence of these things is probably at the heart of many simmering family problems common on the land. A broader take on income generating possibilities might also open up opportunities for family members to remain in touch with the property, through activities complementary to grazing.

Reducing business risk is important both for the operation of the primary production enterprise, and for the management of the new income stream. A sound policy is to look for activities that are complementary to the business of primary production. Starting something completely left field, is going to be much more difficult than going with something you know a bit about. Choosing an activity where the business cycle does not move in tandem with farmed commodity prices is also helpful.

The choice of structure in which to carry on the new business is critical for mitigation of legal risk and income and tax management. A charter aircraft owned by a partnership might be insured, but what if the farm hand filled the plane with petrol rather than avgas. Did you have a fueling procedure manual? No? You’d better hope the insurance company didn’t stipulate one or you might find yourself liable for all sorts of claims. Protect your other assets by establishing a veil between the new venture and your agricultural activities. The structure forming the veil, whether a company, family trust or self managed superannuation fund can also be used to store income for retirement, to smooth income across agricultural cycles and to store income for retirement. Using them well will also mean that tax can be efficiently managed.

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