Ian has already received scores of favourable comments about the book. Here is an excerpt from the review in the January 2012 edition of the Dairy Exporter:
“The 184-page book consists of 11 chapters which break down complex issues…
…The first chapter contains a real-life example of how horribly succession can go wrong, and how damaging such disputes can be to family relationships. Subsequent chapters start with fictitious examples which are used to explain the practical implications of the law.
…Blackman has written a clear, concise guide which will be immensely helpful to farmers….
…The book deserves to be widely read and has set a benchmark for explaining complex legal issues in a thoroughly useful way to farmers.”
Jason and Lisa Suisted
BlackmanSpargo are proud to have sponsored the 2011 New Zealand Dairy Industry Awards for Waikato, the Bay of Plenty, Central Plateau and, for the first time this year, Auckland/Hauraki. This is our way of supporting farmers who, like us, are passionate about their industry and business and who strive for excellence.
Firstly congratulations to Waikato regional winners Jason and Lisa Suisted, who not only won the National Sharemilker/Equity Farmer of the Year but also the Honda Farm Safety & Health Award, Ravensdown Pasture Performance Award and the Westpac Business Performance Award! In the Waikato regional awards, Jason and Lisa won the DairyNZ Human Resources Award and the Ravensdown Pasture Perfomance Award.
These issues eventually find their way to Fonterra. The response is a form for owners who wish to direct Fonterra to pay a percentage of the dividend to the sharemilker.
We did not like the first form they used as it did not seem to cover every possibility and did not include the preferred option of being based on production. In the past, the dividend component (previously value-add component) was paid on production in that season, irrespective of the owner’s shareholding.
In the August issue of Farmlink, Fonterra endeavoured to correct that error by including another box in the payment direction part of the form entitled “Production”. There is a well-written article at page 22 entitled “New Dividend-Related Payment Adjustment Option” which explains this change.
Behind the form and the advice given in Farmlink, there are two important issues that owners should be aware of:
1. The owner should appreciate that if they tick the box “Production”, the sharemilker will be entitled to a percentage of the dividend based on production, not on shareholding. If the owner owns fewer shares than the amount of production in that season, then the owner will not receive the dividend from shares not owned in that season, but the sharemilker will receive a payment equivalent to the dividend funded from the milk price.
2. The amount to be paid to the sharemilker is a percentage of the dividend paid by Fonterra, not the actual amount of money received by the owner. Retentions are deducted from the dividend, not the milk price. Fonterra will only apportion the distributable profit between the owner and the sharemilker (the dividend less any retentions). The sharemilker could still be entitled to a share of the full dividend, without the retention deducted, if not properly addressed in the sharemilking agreement.
Therefore, these are further payments to the sharemilker that the sharemilker would not have received under the old system.
The Emissions Trading Scheme draws a distinction between woodlots prior to 1990 and woodlots after 1989. Any farmer who owns a pre-1990 woodlot has the opportunity to apply to the government for a free allocation of emission units.
The details of the allocation are as follows:
1. The entitlement per hectare is 60 units for land owned before 31 October 2002 and 39 units for land owned after 1 November 2002.
2. The units are currently trading at $18-$25.
3. They can be redeemed through the New Zealand Emission Unit Register.
These applications need to be made before 30 November 2011.
Farmers need to be aware that there is a less-than-50-hectare exemption available. If there is any chance of current woodlots being returned to pasture, then the owner has the opportunity before 30 September 2011 to apply for an exemption. The exemption removes the woodlot from the Emissions Trading Scheme and allows that land to be converted back to pasture without having to pay.
If a farmer does not apply for the exemption, and the conversion of pre-1990 forestland to pasture occurs, then the landowner will be required to refund approximately 800 units per ha to the government. The position will be similar if you apply for the free allocation of 60/39 units per ha, but are required to contribute 800 units per ha. That is a potential cost of $20,000 per hectare, so your decision is very important – if in doubt, apply for that exemption.
It is important, when considering the effect of the Emissions Trading Scheme on farmland and woodlots, to understand that the date for qualification is not when the trees were planted, but what the land was being used for at the critical time. For example, trees may have been planted post-1989, but if the land had been used as a woodlot or forest on both 31 December 1989 and 31 December 2007, then it will qualify. Further detailed information on this topic is available from the MAF webpage at www.maf.govt.nz Click on the guide to Pre-1990 Forest Allocation and Exemptions link. To help you, the deadlines are:
• Allocation of New Zealand Units - 30 November 2011
• Exemption for less than 50 hectares – 30 September 2011
Native forests are not included in the deforestation provisions of the Emissions Trading Scheme, but new native forests are still able to earn carbon credits under the Emissions Trading Scheme.
Dean, who is based in Gisborne, has been presenting on issues around trust administration and farm succession for many years and is a recognised expert in his field.
Elise returned from the seminar “all smiles” because she learned that the high standards set by BlackmanSpargo in trust administration were “best practice”.
Farmers should know that the government and the courts are critically examining the way in which trusts are being administered. More importantly, farmers need to know that the advantages of having a trust will be lost unless the trust is administered properly.
Apart from Elise being so happy that we were meeting and exceeding “best practice”, Dean agreed that in general those providing trust administration services needed to lift their game and improve the support and information given to professional trustees to ensure that the professional trustee was meeting their trustee obligations.
It is common practice for accountants to meet or communicate with the settlors as if they were the only trustees and then refer everything to the professional trustee or third party’s trustee to rubberstamp the accounts.
This is clearly contrary to best practice and can lead to a whole host of mistakes, some of which cannot be remedied.
Rust never sleeps, and so too Elise continues to want to make small improvements to the way we do things here. As a result of her attending this seminar, we will be undertaking a comprehensive audit of our systems and procedures and, no doubt, will be again writing to those involved in trusts and asking them to “play above the line” when it comes to trust administration.
Ultimately, these processes and procedures have a financial cost, but the advantages available to trusts are so important that the small cost for proper administration each year is a small price to pay for failing to do it properly and finding that the trust is ineffective.
Congratulations to Elise for such a fine job. Keep it up!