Off-farm diversification while you still run the farm

Most farming families I sit down with are wealthy on paper and stretched in the bank account. Nearly everything they own sits inside the boundary fence, it's taken generations to build, and none of it was built by selling.

Nobody made a mistake getting there. The risk is that it doesn't look like a risk until a dry spring and a slump in cattle prices land in the same year as a family decision nobody was ready for.

One asset deep

Land wealth concentrates for good reasons. Every decent season's surplus has somewhere useful to go, whether that's the neighbour's block, another two hundred megalitres, better genetics, or a new header.

And the family rule, usually unspoken, is that you don't sell land. After forty years of that, the balance sheet is one asset deep.

A share portfolio that's too heavy in one company can be trimmed on a Tuesday afternoon. A farm can't be trimmed without changing the business, and the things that hurt it tend to arrive together.

A dry spring in the Wimmera cuts the wheat cheque and lifts the feed bill at the same time, and if it runs long enough it takes the shine off what the land would fetch too. Usually that's the same year the bank wants to review the facility. Meanwhile the family's income, its home, the parents' retirement, and the kids' inheritance all rest on the same land.

What it's for

Off-farm diversification just means building assets beside the farm that don't depend on it. I think it's one of the smartest things a farming family can do, and it's far easier to start in a good year than a bad one. Shares, fixed income, cash, super, and property well away from the district are the usual pieces, and none of it needs a hectare sold.

When families tell me why they want it, the reasons come down to four things:

1. Getting through the bad years. Something to draw on in a drought or a price slump that doesn't mean new debt or selling breeders at the bottom of the market. It won't replace a good season, but it can stop a bad one forcing a decision.
2. The parents' retirement. Income that doesn't have to come out of the next generation's cash flow once the parents step back.
3. The kids who aren't coming home. Something of real value for the children who won't be taking on the land.
4. Room to move. The means to buy more country when the right block comes up, or to back a child who wants to do something else entirely.

Each one asks something different of the money, which is why it's worth naming them before anything gets invested.

Who owns it matters too. Money in personal names, a family trust, a company, or super is all treated differently, and the proposed 2028 trust tax changes, still in draft, could shift that again.

Uneven years

Farm income doesn't arrive in tidy monthly amounts. A big wheat year can be followed by two poor ones, and a budget that assumes otherwise breaks in the first dry spell.

The families who build off-farm wealth steadily work by rule rather than by schedule. In the years there's surplus after the farm's needs are met, some of it goes outside the gate, but the farm has first claim and debt, machinery, and the next block will sometimes win. What matters is making the call on purpose rather than letting the machinery dealer make it for you.

Farm Management Deposits are usually the first stop, and they're brilliant for smoothing a lumpy income. But an FMD is still cash in the bank waiting for the next dry year, so it's a buffer more than a plan (and the tax rules on it are one area where I'm happy to hand the calculator to the accountant).

Surplus isn't the only source, either. A house in town that nobody's lived in for years can become off-farm money without touching a hectare. And in a wet run, water the farm doesn't need can be leased out rather than sold, so the entitlement's still there when the dry comes.

The kids

Off-farm wealth does its quietest work at succession. When the farm passes to the one who's farming it, the others need something of real value too, and on most places the only other ways to create that are new debt or selling land.

A portfolio built up over the years can be their share, so the farm stays whole and nobody gets paid out with borrowed money. It also takes the pressure off the timing, because parents with their own retirement income can hand over the operation without needing it to keep paying them.

There's more on how that plays out in what happens when the will splits the farm equally.

The bigger call

Sometimes the plain answer is that a slow build beside the farm won't get the family where it needs to go. Maybe the parents are ready to stop and nobody's coming home. Or the debt has grown faster than any portfolio could, and the family needs a decision rather than another decade.

That's when a bigger conversation makes sense, with four outcomes on the table: hold, consolidate, sell part, or sell. Selling an outblock that's never really fitted the rest of the operation can fund in one step what twenty years of surplus wouldn't.

For families who've already sold, what to think about before the money moves covers the next set of questions.

Where we fit

Larapinta works with farming families who intend to keep farming, and our part is the portfolio beside the operation. We build it in three sleeves, and the first one is built with the dry years in mind.

Treasury holds cash, near-cash, and bonds, money that's there to draw on in a bad season so the family has an option other than selling breeders or borrowing more. Foundation is the long-hold core that's meant to outlast all of us, and Conviction is a smaller set of researched positions, tailored to each family's liquidity needs, risk profile, and interests.

The research is institutional-grade, through our investment partner arcpoint, but the judgement on what each family owns, and when, stays with me.

We also like to sit down with the family's accountant and solicitor early, rather than hand them a portfolio after the fact. They design the structure and we make sure it suits what the money has to do, so the family ends up with one plan instead of three.

What it means

If most of what your family owns sits inside the boundary fence, there's no reason to sell and no need to fix it all this year. It's worth starting, though, and there are three questions to ask at the kitchen table first.

What would carry us through two bad seasons back to back? Where does the parents' income come from once the farm's handed on? And what do the kids who aren't farming end up with?

If every answer points back to the land, that's the place to start (and it's a kitchen-table conversation I'll happily drive a long way for).

Your land. Your legacy. Looked after.