A farmer’s guide to leasing land 31 May 2011

A new research report released today by the Rural Industries Research and Development Corporation (RIRDC) will be a useful business resource for farmers and their advisers, when it comes to making decisions about leasing rural land. 

The second edition of the report Successful Land Leasing in Australia – A guide for farmers and their advisers identifies ways of valuing leases, a critically important part of the process of establishing a lease, especially for grazing land in an environment where stock values are very high.

“This publication aims to identify the circumstances where leasing farm land is a suitable form of farm business expansion, with both financial and environmental benefits. It examines how leased land can be managed in a profitable and sustainable way that is fair to both landowner and tenant,” RIRDC Senior Research Manager Ken Moore said.

“The report includes a case study illustrating these principles with practical examples.

“The economies of scale of broadacre farm businesses are often directly related to the return on capital achieved, with bigger businesses tending to achieve higher returns. Many farm businesses would improve their financial situation by leasing land and investing some of the income into land improvements.

“This option is especially attractive when it allows for the land to be managed in a sustainable manner, making it a win-win situation for both the landowner and the tenant.” 

“There is considerable potential for Australian farmers to expand by leasing land, a practice which is much more common in England, Wales and the US. The report covers lessons to be learnt from leasing of land there,” Mr Moore said.

The report recommends that before a landowner and tenant enter into a lease, it is important that they identify the taxation and legal consequences and make a detailed financial analysis of the lease and prepare a detailed business plan which identifies the effect of the lease on their business direction and performance.

”Successful Land Leasing in Australia – A guide for farmers and their advisers" is available for free download or purchase from the RIRDC website