The Dairy Industry Adjustment Package

Preparation of a Farm Business Assessment

The final details of the deregulation package are about to be released.  All farmers who qualify for the package will be required to apply for their payments.  Part of the application requirements is the completion of a "Farm Business Assessment".  This requires the collection of financial data for the current year including income and expenditure, assets and liabilities.  This data is then used to project the financial performance of the business next season based on the likely milk price post deregulation.  For Victorian farmers, the milk price will not be influenced as much by deregulation compared with other states.  A worst case scenario will need to be calculated based on possible milk prices for next season.

The "Farm Business Assessment" must be examined by a financial adviser and "signed off" prior to lodgment of the application.  The purpose of having a financial adviser examine these financial predictions is to guarantee that each farmer has considered in detail, the impact of deregulation on their enterprise and has planned for effective use of the deregulation payment. A number of industry service providers including accountants and farm advisers will be able to examine these financial records and "sign off" for farmers to complete their application. Tom Walsh and I will be included in this list.  For clients with whom we contact regularly as part of our farm management consultancy service, this will be a simple process of signing the form since such financial planning is an ongoing part of the service.

For many other farmers, they will have the required documents prepared as part of this business management and will need to present these to a financial adviser for signing off.  In doing so, they will need to discuss with the adviser how best to respond to the changed market circumstances for their dairy farm business.

Some farmers will require professional assistance to complete the farm business assessment form in order for it to be "signed off" by their financial adviser.  For many accountants, this will impose an even greater burden on their GST instigated heavy workload.  It will not be necessary to have completed the 1999-2000 year tax returns to have the forms signed, however a forecast of the current year's income and costs and a projection for next year will need to be calculated.  As a minimum, the following details will need to be collected and analysed to adequately complete a farm business assessment:
  • Last years profit and loss statement from the tax return.
  • Production statements to date for this season.
  • A list of current creditors.
  • The latest bank statement.
  • A list of assets and liabilities.


Tom and I will offer this service to farmers as an alternative to their accountant.
For farmers who have prepared forecasts, this will be a short process requiring perusal of documents and discussion of the range of options available with the package to adjust to changed market circumstances.  For others, it may involve simple or detailed analysis of their farm business options. The minimum requirements before signing the application, however, will be to prepare a budget for next season and summarise assets and liabilities.


We will offer this service based on the individual needs and requests of each farmer.  It may be appropriate to first discuss this assessment by phone prior to arranging an appointment either at the Clinic or on farm.

The federal government has decided that this process is a pre requisite for farmers before qualifying for the deregulation package.  No adjustment package payments will be received until this process has been completed.  Farmers failing to comply with these requirements will not be eligible to receive payments starting in the first week of September.  Failure to complete these applications within 90 days will deny farmers the ability to receive the deregulation payments.  There is no government or dairy industry assistance with the cost of preparation of these financial documents.  For those with financial planning skills who prepare the documents themselves, the cost will be minimal.

 



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