Man­ag­ing debt first step to bal­anc­ing the books

Irish Independent - Farming - - FINANCE FARMING - THERESA MUR­PHY

QMy wife and I have been farm­ing since we got married al­most 10 years ago. We have three young chil­dren and at present we are scrap­ing by on the small in­come the farm is mak­ing. We are fac­ing the re­al­ity that it is not prac­ti­cal for my wife to re­turn to work off-farm as the child­care costs would wipe out any in­come she would make. I keep hear­ing about the econ­omy im­prov­ing but we are find­ing the re­al­ity is very dif­fer­ent, wait­ing for the Ba­sic Pay­ment Scheme cheque to meet our debts and bills. What can we do?

AAs the econ­omy re­cov­ers, it is im­por­tant to re­mem­ber that the ris­ing tide has not risen all boats. Av­er­age 2017 in­comes on some farms are not pro­jected to be any higher than 2016 and may even be slightly less this year. Last year was a very mixed year for Irish farm­ing, with dif­fi­cult weather con­di­tions af­fect­ing har­vests, grass growth and other crop yields. Added to this were lower prod­uct prices in the dairy and beef sec­tors.

The Tea­gasc Na­tional Farm Sur­vey for 2016 put the av­er­age farm in­come at €12,900 in the case of suck­ler farms and €16,000 on sheep farms. With the av­er­age in­dus­trial wage sit­ting at €37,000 at present it is clear that it would be im­pos­sivle for many farm­ers to sur­vive with­out an off-farm in­come.

MAN­AG­ING BOR­ROW­INGS AND DEBT

Like any busi­ness a farm is likely to be car­ry­ing debts and bor­row­ings at some level. In bad years it is es­sen­tial to man­age these as they can end up cost­ing a lot just in in­ter­est. Bear in mind that av­er­age in­ter­est rates for ex­ist­ing lend­ing are be­tween 4 and 4.5pc while in­ter­est rates on new bor­row­ings sit above 5pc in many cases. If you are car­ry­ing sig­nif­i­cant bor­row­ings you should shop around for the bet­ter in­ter­est rates and con­sol­i­date bor­row­ings if nec­es­sary.

Also, watch for new schemes­like the agri cash­flow loan which came on stream in early 2017 to strong de­mand and had an in­ter­est rate of 2.95pc. It could help keep down the cost of new fi­nance and even as­sist with ex­ist­ing ex­pen­sive bor­row­ings. For many fam­i­lies there is also the com­mon is­sue of man­ag­ing credit card debt.

Again, if you find that you have built up credit cards debts with re­sult­ing very high in­ter­est rates you should look at the pos­si­bil­i­ties around debt con­sol­i­da­tion and tak­ing out a man­age­able in­ter­est rate loan to clear the cards.

PAY­MENT SCHEMES

De­spite an over­all in­crease in Di­rect Pay­ments to the farm­ing sec­tor at na­tional level in 2016, the pic­ture at in­di­vid­ual farm level varies sig­nif­i­cantly, depend­ing on par­tic­i­pa­tion in farm schemes, and the re­dis­tri­bu­tion of the Ba­sic Pay­ment that is on­go­ing.

Ev­ery farmer should be con­sid­er­ing the fi­nan­cial ben­e­fits that tak­ing part in new schemes may bring. Look at op­tions like the Beef Data Ge­nomics Scheme which may present ex­tra in­come op­por­tu­ni­ties.

FARM AS­SIST

Farm As­sist is a means-tested pay­ment for low in­come farm­ers. The means test takes ac­count of vir­tu­ally ev­ery form of in­come but as­sesses it in dif­fer­ent ways and dis­re­gards var­i­ous amounts. Dif­fer­ent rules ap­ply to in­come from farm­ing and other forms of self-em­ploy­ment, in­come from cer­tain schemes, in­come from em­ploy­ment and in­come from prop­erty and cap­i­tal. There are ad­di­tional in­come dis­re­gards if you have chil­dren. Your means from all sources are added to­gether to get a to­tal weekly means. You will be paid the dif­fer­ence be­tween your to­tal as­sessed weekly means and the max­i­mum rate of Farm As­sist that you could get if you had no means. When you ap­ply for Farm As­sist, a so­cial pro­tec­tion in­spec­tor will call to see you and ask to see var­i­ous doc­u­ments.

For ex­am­ple, ac­counts pre­pared for tax pur­poses, cream­ery re­turns, cat­tle regis­tra­tion cards, de­tails of EU scheme pay­ments. They will also want in­for­ma­tion on the sale of crops, cat­tle, milk and other pro­duce.

The in­spec­tor will then as­sess the costs ac­tu­ally and nec­es­sar­ily in­curred in con­nec­tion with the run­ning of the farm. These costs may in­clude rent, an­nu­ities, the cost of in­puts like feed and fer­tiliser and the de­pre­ci­a­tion of farm ma­chin­ery.

Labour costs are taken into ac­count, with the ex­cep­tion of the labour of the farmer and their spouse, civil part­ner or co­hab­i­tant.

You are en­ti­tled to re­ceive a copy of this farm in­come cal­cu­la­tion.

The cur­rent max­i­mum per­sonal weekly rate (for a per­son with no de­pen­dent chil­dren) is €193.

This is in­creased by €128.10 for de­pen­dent adults, for ex­am­ple, your spouse and €29.80 for

de­pen­dent chil­dren.

Theresa Mur­phy is a bar­ris­ter based in Co Gal­way

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