For most farming families the farm is both the business and the retirement fund. Passing it on fairly, while keeping enough to live on, is one of the hardest decisions a family makes. It also takes longer than most people expect, which is why it pays to start early.
Why Succession Gets Stuck
A 2024 Nuffield scholarship report found a familiar pattern: land costs put ownership out of reach for the next generation, the farm property market favours all-or-nothing sales over staged handovers, and the older generation can be reluctant to let go of control. The report’s author recommends early, open conversations, often with an outside facilitator.
Two Questions to Answer First
What does each person want? The retiring owners, the child who farms, and the children who don’t.
What does the retiring generation need to live on? Income, housing and a safety net for care costs. This sets the limit on what you can pass on, and when.
Fair is not always equal. A child who has worked on the farm for years and children who have not may expect different things. Talk about it early.
The Main Options
Sell to the next generation. A sale at market value, often with the seller leaving part of the price owing (vendor finance). It gives the seller income, but the buyer still needs funding, and the value must be agreed.
A staged handover. Sharemilking, lease to buy or an equity partnership, with ownership moving over time. It spreads the risk and the cost, but needs clear agreements on price and timing.
Gift over time. Transfer shares or land in stages. This is subject to the rest home gifting rules below.
Hold the farm in a trust or company. Interests are passed on over time. A structure doesn’t remove the gifting rules, so keep records and take advice.
Sell outside the family. Sell on the open market and divide the proceeds. This is cleanest if no one wants to farm, but think about the tax and how the family will feel.
Tax and Money Points to Check
New Zealand has no inheritance tax, and gift duty was abolished in 2011, but that doesn’t mean a transfer is free of tax.
Livestock. Special rules apply when livestock valued under the herd scheme is sold to an associated person. There is an exception for a transfer to the owner’s son, daughter or grandchild, but only if the child had no interest in the livestock before, the sale is at market value on commercial terms (the parent can help with finance), and the parent has sold all their specified livestock and earns no income from it for the following four years. Inland Revenue’s guidance (OS 25/02) has the detail.
Plant and machinery. Selling depreciated assets for more than their tax value can create taxable “depreciation recovered” income.
GST. A sale of land between GST-registered people may be zero-rated under the compulsory zero-rating rules, and a sale of a farming business as a going concern can also be zero-rated if both sides agree. Farmhouses can be treated differently, so check this before the sale agreement is signed.
Valuation. The price decides the tax, the gift element and the fairness between children. Get an independent valuation.
The Rest Home Gifting Rules
If the transfer includes gifts, these rules matter. Work and Income looks at gifts made in the five years before a residential care subsidy application. From 1 July 2026, it doesn’t count up to $8,500 of gifts a year in that period (up to $42,500 over the five years for a person and their partner combined). Gifts made before the five-year period are not counted up to $27,000 a year. Gifts to a carer in recognition of care can also be excluded under set conditions, but they count towards the $42,500 limit. Gifts to another person or entity count, and Work and Income also checks that anything sold in the last five years was sold for fair value.
These figures change each 1 July and were correct at 2 November 2026. Plan with them in mind and keep good records.
A Simple Way to Start
Hold a family meeting. Think about an independent facilitator.
Write down what each person wants, including the retirees’ income and housing needs.
Value the business and test the cash flow. Can the farm carry the debt of a buyer and the retirement income of a seller?
Choose a pathway, or a staged mix.
Take tax and legal advice, update wills and enduring powers of attorney, and look at relationship property agreements.
Put it all in writing and review it every year or two.
If the farm is held in a trust, our overview of the Trusts Act 2019 is a good place to refresh on trustees’ duties. If you are thinking about bringing in a partner, see our guide to farm equity partnerships.
How Ake Can Help
We can value the business, model the cash flow for the buyer and the seller, compare the pathways and their tax effects, and work alongside your lawyer. Have a kōrero (conversation) with us before decisions are locked in. Contact us.
This guide is general information, not tax, legal or financial advice. Your situation will be different, so talk to us before you act.
Sources
Inland Revenue: OS 25/02 Valuation of livestock (31 March 2025); IS 20/05 GST on supplies of residences and other real property