Rural Business Tasmania Inc.

Delivering the Rural Financial Counselling Service

Tasmania (RFCST) Program

• Introduction

– Who are RFCS Tasmania (RFCST) ?

– Short history of RFCST

– What do RFCST do ?

– What services do RFCST offer ?

Who are RFCS Tasmania ?

Rural Business Tasmania (RBT) is a not for profit association that delivers the Rural Financial Counselling Service Tasmania (RFCST) program.

RBT receives its funding from the Federal Government Department of Agriculture (DoA), and the State Government Department of Primary Industries Parks Water & Environment (DPIPWE), Rural Youth Tasmania and a number of commercial sponsors, both in kind and in $.

RBT is managed by an independent board, with three full time rural financial counsellors, a part time Executive Officer and a part time admin assistant.

Short History of RFCST

Established in 1987 by the Rural Youth organisation, Rural Business Tasmania (in another name) began operation with one counsellor as a crisis service.

It has been successful in gaining various subsequent grants to run the RFCST program. A grant application to run the service for the period 2016-2019 is currently being prepared.

Staff of 3 counsellors:North West : Paul Briant (full time) North : Roly Chugg (full time)South : Leigh Noye (full time)Admin. Assistant: Wendy James (part time – based in Hobart)

What do RFCST do ?

RFCST specialises in helping farmers and agriculturally dependent small rural business with assessing and understanding their financial situation and to look at what assistance they may be able to access.

It’s main aims are to:

• Help farm families assess and understand their financial position;

• If financially stressed assist in identifying options and develop a plan of action;

• Support and facilitate their financial decisions; and

• Make people aware of their eligibility for various benefits or assistance to which they are entitled.

Particular areas where RFCST offers information and assistance include :

• Help farm families assess and understand their financial position including assistance with preparation of budgets and cash flows

• Review of contracts and loan applications with lending institutions and/or rural merchants

• Communication with lenders and facilitation of meetings with financial institutions and/or rural merchants

• Facilitation of decision making and communication between family members including succession planning

• Help with planning for the future including retirement or exiting agriculture • Help to identify eligibility for Centrelink and other Government

entitlements and provide an advocacy role in dealings with same• Access to Centrelink claim forms and assistance to complete • Referrals to relevant professional advisors for further assistance.

THE BOB & JANE STORY

THE REFERRAL:

- Prior to any contact from Bob & Jane we’d had calls from- A concerned friend and existing RFCS client- The finance manager of their stock & station agent

- Both said Bob and Jane were financially and emotionally stressed. They had suggested Bob and Jane contact us and expected they would be in touch.

- Two months later the call came – as a direct result of these referrals.

FIRST MEETING:First met clients in 2013 – admitted feeling better just from making contact, saying they had nowhere to turn.- Dairy farmers milking 150 cows in “normal” times – reduced to 100

with dry times/high feed costs. Approx 200ha of sown pasture and light bush. Further 40ha leased.

- Property in family name for 100+ years – part owned by Bob’s estranged brother who refuses to sign mortgages to enable increased borrowings.

- Bob & Jane also run contracting business – cutting/baling hay etc – scope to expand.

- Adult son and daughter employed /living off farm who assist occasionally – important for them to be able to leave some property to son.

- Explained extremely tight financial position impacting health – Jane sought medical intervention but Bob resisting and great concern for his mental status.

FINANCIAL POSITION SUMMARY:Assets

Farm & Improvements (owned by Bob & Jane) 300,000Farm & improvements (owned by Bob & brother) ½ share 350,000Livestock 200,000Plant & equipment (including 5 tractors) 500,000

$1,350,000Liabilities Bank Loans 250,000 Bank O.D (Limit $100,000) 100,000 Creditors (exc ATO and stock agents) 75,000 ATO 50,000 Stock & Station Agents 250,000

$ 725,000

SURPLUS $ 625,000

TRADING SUMMARY:

PROBLEMS:

- Losses had taken their toll – clients attributed to drought/increasing input prices - my assessment, poor management also contributing

- Brother refusing to sign documents for increased borrowing however, bank approval doubtful based on trading results

- Stock & station agents want permanent debt reductions - Pressure building from creditors including ATO with no cash flow to

cover. No cash for stock feed

NO PLAN IN PLACE

Trading Position 2010 2011 2012 2013Net Cash Deficit (16,878) (63,760) (55,722) (106,317)

INITIAL ACTION PLAN1) Bob referred to GP to treat his mental health2) Engage dairy consultant to review operation/assess long term

viability3) Have a valuer compete valuation of land owned by Bob & Jane

– assess subdivisional prospects.4) Bob to review plant & equipment with view to sell surplus.5) Centrelink application for income support and assistance with

consultant costs.6) Advise bank and stock & station agents of actions - to

encourage their support in funding ongoing essential requirements.

7) Jane to explore options for off-farm employment.8) Make arrangements via accountant for ATO repayment

arrangement.

WHAT HAPPENED NEXT1) Bob visited GP and via medication and counselling was in a better

frame of mind to make decisions2) Consultant confirmed that given drought and debt levels enterprise

not viable long term and couldn’t be given “normal conditions”.3) Valuation completed at $300,000 (same as client’s estimation) with

opportunity to subdivide in two to add value – say $200,000 each.4) Bob identified surplus plant & equipment and valuations obtained.5) Centrelink assistance approved.6) Meeting with stock & station agents who agreed that with RFCS

intervention support for essentials would continue to max. $300,000. (+$50,000). Allowed breathing space but action plan enabling repayment required.

7) Jane obtained p/t employment in a nursing home earning $500-wk.8) Accountant arranged ATO repayment of $500 per month with

assessment of position within 6 months.

What did that leave us – what were the options?Creditor pressure remained but now sufficient information and available funds to make more orderly decisions.Options reduced:- • Trade on not an option based on consultant’s report.• Surplus asset sales required despite Bob’s reluctance due to “A bad

time to sell with dry times causing reduced prices”.

What could be sold?• Non essential plant & equipment including 2 tractors• Dairy cows – sell ½ and get cows in calf to maximise returns• Land – family meeting held and agreement to subdivide and place 1

block on the market.

What happened then?Over the next 12 months:-• Plant & equipment was sold - $150,000• Cows gradually sold - $200,000• One block was sold $350,000 (more than valuation)• The other block was transferred to son as his “inheritance”

Where are they in 2015?• They continue to agist heifers on remaining property and Bob runs their

contracting business when not employed on neighbouring farms.• Jane continues to work in nursing home.• Kids happy to see mum and dad enjoying life free of financial hassles.• They are debt free• They love RFCS and wish they had sought assistance earlier!• They still have issues with Bob’s brother due to joint ownership of remaining

land.

So what did the Rural Financial Counsellor do?

1. Promptly analysed situation and identified key issues2. Helped them to see what their financial situation actually was.3. Strongly encouraged Bob to seek support through referral to his GP.4. Assisted them develop an action plan and engage the support of

consultant, valuer, Centrelink, stock and station agents – all the time giving them ownership.

5. Co-ordinated easing of financial pressure from creditors & ATO.6. Assisted them to overcome many hurdles they had put in front of

themselves (family meeting, helping find outside employment.)7. Acted as a sounding board throughout and ensured action plan being

followed.8. Facilitated discussion of post dairy farming options.9. Clients believe a life was most likely saved as without assistance there

may have been dire consequences.

NoteThis is just a brief summary of what occurred.

It is almost two years between first contact and settlement for sale of property. Much time had been spent discussing options and ways forward and also a lot of contact with the valuers, accountant, the consultant and the stock and station agents.We were somewhat lucky that property sold for more than anyone thought possible but the homework on that was done by consulting a valuer to assess subdivisional prospects.