ASB chief economist Nick Tuffley expected to see farmers pay down debt, and maybe some maintenance or capital spending for the farm.<\/p>\n
He said rural communities in key farming areas would benefit from the cash injection.<\/p>\n
\u201cThis is a big, one-off payment.<\/p>\n
\u201cIt will take time for some of the spending impacts to flow through, but that is going to benefit rural communities. <\/p>\n
\u201cAnd also, we think it\u2019ll put the dairy farming sector in a more resilient position.\u201d<\/p>\n
Tuffley said some older farmers were planning their departure from the industry.<\/p>\n
\u201cIt will also set up some dairy farmers for their future as well, particularly if they\u2019re looking at diversifying and putting that money to use in other ways that will help them at that time of life if they move off the farm.\u201d<\/p>\n
\u2018Never hard to spend money on a dairy farm\u2019<\/p>\n
John Dawson, a Morrinsville-based farm management consultant of nearly 30 years, said paying down debt would be the number one priority for most of the farmers.<\/p>\n
He said others were also planning on re-investing the money into their farm operations, such as the cow shed.<\/p>\n
\u201cIt\u2019s never hard to spend money on a dairy farm. <\/p>\n
\u201cThere are often deferred maintenance issues that need to be attacked, things like fencing and milking plant maintenance.<\/p>\n
\u201cThere are compliance issues, which you can throw a lot of money at, perhaps upgrades to effluent systems and environmental initiatives.\u201d<\/p>\n
He said another option could be opportunities for improvement projects, like new buildings or upgrades to machinery.<\/p>\n
\u201cThe other thing is that there\u2019s the opportunity for expanding the business, you know, more cows, upgrades to cow sheds.\u201d<\/p>\n
Dawson said the payout also represented a chance for succession planning, which a few clients were looking at.<\/p>\n
Rural Chartered Accountants Whakat\u0101ne director Shannon Harnett said the payout was a significant amount of money.<\/p>\n
\u201cI think it is quite exciting,\u201d she said.<\/p>\n
\u201cIt landed in farmers\u2019 bank accounts [yesterday] morning, and it\u2019s a tax-free capital repayment. <\/p>\n
\u201cI\u2019ve heard some people saying it\u2019s like lotto, but really it\u2019s money coming back to the farmers, which is really good.\u201d<\/p>\n
Her clients intended to use much of it to repay debt, she said.<\/p>\n
\u201cAs we go into an environment where it looks like interest rates will come up again, getting that debt level down will make quite an impact.\u201d<\/p>\n
Harnett said farmers had experienced a good few years of earnings, but costs were going up.<\/p>\n
\u201cWe\u2019ve seen cost increases over the last few years, but over the last few weeks we\u2019ve, of course, had the fuel costs rising as well, but it\u2019s not only fuel, it will be fertiliser too.\u201d<\/p>\n
Older farmers would also take the opportunity to look at succession planning, she said.<\/p>\n
And holiday planning was underway for some.<\/p>\n
Gore travel agent Aimee McKee, the owner of Aimee McKee Travel, said farmers had contacted her about booking holidays in places including Canada, Asia and Europe.<\/p>\n
\u201cWe\u2019ve had a bit of enquiry come through from dairy farmers, especially in our community … which is so exciting,\u201d she said.<\/p>\n
\u201cFrom year to year, everyone\u2019s budget-conscious, and I guess with payouts like this, maybe bucket-list trips might be creeping in as well.\u201d<\/p>\n
How to keep the payments tax-free<\/p>\n
The payments were not considered income or a dividend, so they would be tax-free for shareholders.<\/p>\n
But much of the shareholding will be held within farming companies, which could funnel payments through the farm company bank account.<\/p>\n
Tax adviser Craig Macalister of Southland firm Findex said tax implications could bite farmers if they spent their payments from the farm bank account on a personal asset, like a new holiday home or a holiday.<\/p>\n
\u201cThere hasn\u2019t really been a lot of discussion on what happens when people want to take that money out of their dairy milking company, and that\u2019s where the tax implications could bite,\u201d he said.<\/p>\n
\u201cCapital can go into a company, but it can\u2019t come out in any other form that is not taxable unless you effectively wind that company up. <\/p>\n
\u201cThat\u2019s the problem that people will face.\u201d<\/p>\n
Macalister recommended farmers speak with their accountants before spending up.<\/p>\n
From the sale of Mainland Group to France\u2019s Lactalis, the 8000 or so farmer-shareholders will get their split of $3.2 billion, while the remaining $1b will go into the co-op.<\/p>\n
– RNZ<\/p>\n","protected":false},"excerpt":{"rendered":"ASB chief economist Nick Tuffley expected to see farmers pay down debt, and maybe some maintenance or capital…\n","protected":false},"author":2,"featured_media":379972,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[103947,74,138,5399,5658,12026,7226,111,139,69,19334,48037,25396,23330],"class_list":["post-379971","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-400k","tag-after","tag-business","tag-debt","tag-experts","tag-farmer","tag-fonterra","tag-new-zealand","tag-newzealand","tag-nz","tag-payout","tag-repayment","tag-urge","tag-windfall"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/379971","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=379971"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/379971\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/379972"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=379971"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=379971"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=379971"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}