Buying farm land using superannuationBecause of the generally large outlay in purchasing farm land, invariably most will go down the path of borrowing.  Most times the decision to buy more land is not something that is planned because land is quite tightly held and opportunities only present from time to time. 

Farming is capital intensive so I don’t know too many farmers who have a stash put away waiting to buy their neighbour’s property. 

The most common way that farm land is bought is to arrange a loan with a bank and hopefully pay the debt over a number of years.  The great thing about farming is that it’s truly a long term business and assets like farm land usually stay in the family for the next generation to benefit from.

The disadvantage of buying land this way is that it is very expensive; not because of the interest rate but because of the tax that will be paid in repaying the loan principle.

Superannuation on the other hand is a far more cost effective strategy especially where borrowing is used. The savings and advantages are just too great to not consider this option.

In a like for like situation with similar borrowing arrangements, the savings through superannuation are many hundreds of thousands of dollars less compared to traditional borrowings (assuming the purchase price is around $1m).  Not only are there huge savings but the time to payout the loan is years less.

There are in essence two main methods of financing farm land through superannuation. The loan structures and arrangements are quite different so it’s a matter of matching your objectives and circumstances to the strategy that will give you the optimum results.

Because of the strict compliance and legal requirements around superannuation it’s advisable to seek professional advice and support from a specialist financial adviser and accountant who have skills in this area.