Introduction to Leasing
Leasing land can provide a way to expand your farm business operation and increase economies of scale without investing in land, which can be cost prohibitive, particularly for young farmers.
A lease is where the tenant/lessee pays an annual fee (that may be fixed or indexed to inflation) for the use of the lessors land for a prescribed period (normally 3-5 years).
The video and factsheet below introduce the concept of leasing and will help you understand whether it might be the right fit for you to start or expand your farming business.
Calculating a Lease Value
There are several ways to calculate a lease value for agricultural land. Some of the most common are:
1) Percentage of market land value of the leased land 2) Percentage of expected gross margin 3) Percentage of expected operating profit 4) Dollars per hectare.
The factsheet, video and lease calculator below will help you to calculate a lease rate based on your circumstances. The resources will help you calculate a lease budget to enable you to enter discussions with the landholder with some options and with a deep understanding of what is viable for you.
Lease agreements in the past were typically informal or handshake agreements. It is common for people to rush and draft an insufficient lease, which later has its deficiencies exposed.
It is recommended a formal lease agreement is drawn up and reviewed by experts prior to the commencement of the lease that states the responsibilities and expectations between each party. Once agreed upon and signed, a lease agreement might never be looked at again. However, if problems do arise they are a crucial document to assist in resolving issues.
The factsheet and sample lease agreement below will guide you in understanding and navigating lease agreements. They are examples only and we recommend you engage your own advisors to develop an agreement specific to you.
Introduction to Agistment
Agistment is the fee a livestock owner will pay to another landholder for the right to graze a defined number of livestock on the property for a defined period. It can be an option for young farmers to consider as entry strategy when there is not sufficient capital to buy property. It is also used when feed demand outstrips feed supply during dry times or when you are growing your herd at a faster rate than your land base can carry.
The video and factsheet below introduce the concept of agistment and will help you understand whether it might be the right fit for you to start or expand your farming business.
Calculating an Agistment Rate
There are several ways to approach and analyse the concept of running some or all of your livestock on someone else’s property. Some of the most common agistment methods are:
1) Dollars per head per week 2) Dollars per DSE per week 3) Percentage of weight gain or 4) Percentage of profit share.
The factsheet, video and agistment calculator below will help you to calculate an agistment rate based on your circumstances. You can use the calculator to understand what you can afford to pay for agistment and will empower you toenter conversations with the landholder with a number of options to discuss.
An agistment agreement is a verbal or written agreement between a landowner and an owner of livestock which sets out the terms whereby the livestock can be grazed on the landowner’s land.
Issues that commonly arise from agistment agreements surround either mismanagement of livestock, infrastructure and pastures or non-payment of agistment fees. The work the parties do in preparation for the agistment agreement can overcome a lot of these issues.
The factsheet and sample agistment agreement below will guide you in understanding and navigating agistment agreements. They are examples only and we recommend you engage your own advisors to develop an agreement specific to you.
Our experts leave a final word for young farmers setting out on their lease or agistment journey’s. We have also included two checklists to help you to remember all the bits and pieces to cover off on before, during and at the end of the respective agreements.
The video below outlines several tax implications of leasing and agistment. Income generated from the property (e.g. sheep/cattle sales) are included as taxable income and expenses incurred are tax deductible (e.g. lease/agistment fees, legal fees, input costs, repairs)