Investing in assets off-farm and away from your agribusiness can be a worthwhile strategy to diversify risk.
Often farming families have the majority of their assets tied up in agricultural land and the farm's operating business. We outline some pointers to consider when diversifying off-farm to help reduce business risk.
Investing into assets away from the farm allows you to reduce your investment risk through diversification.
Building an asset base away from the farm, enables farmers to build up retirement assets for the next stage of their life.
This also allows the next generation to take control of the farm without being a financial burden on the retired farmer.
In the case of superannuation funds, it’s also protected from creditors.
Are there incentives to investing off a farm?
When you contribute to your superannuation funds, it allows you to reduce the amount of tax that you have to pay.
The real benefit to invest your superannuation off farm is that once the money is in super the earnings are taxed up to a maximum of 15%.
EXAMPLE: If someone is earning $80,000, any earning on investments outside of superannuation would be taxed at 37%, whereas in super it’s only taxed at 15%.
Compound the discount over the long-term, and the end result is very beneficial.
Get in touch with an RSM financial adviser.
A strong and comprehensive off-farm investment strategy based on advice from experts is a must.
Talk to a RSM financial adviser at your local office today.