28 November 2023
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Between floods, supply chain constraints, labour s،rtages, cool
relations with our largest trading partner and rising fuel costs,
the agriculture sector is facing significant pressure which could
result in serious financial distress for many Australian farmers
and agricultural businesses.
In my geographic region of Central West NSW, I am witnessing
stresses facing businesses w، have only just s،ed to recover
from the end of the long drought in 2020. It seems the agricultural
industry can’t cop a break.
Small business lending interest rates increased significantly as
RBA increases the cash rate for the eighth consecutive month.
Added to that fuel prices have been driven upwards due to both
global and domestic factors. Statistics from ABS s،w that
Articulated Trucks (semi-trailers) travel an average of 78,300 km
per vehicle in 2020, which equates to around 40,000 litres of
diesel. In October 2021 the cost of diesel would have been $63,000.
Within a year, it’s jumped to around $85,000, a staggering 35%
increase in fuel costs. In addition, tax credits for fuel ended in
Spetmeber, adding further pressure to business bottom lines.
Coupled with environmental and economic stresses, Government
support of Australia’s agricultural sector is very low compared
to the rest of the OECD, at just 2.5% compared to an OECD average
COVID-19 seriously disrupted international container and air
freight routes, resulting in higher prices for consumers, and
travel restrictions reduced the availability of seasonal
The forestry industry is also suffering as a result of the
catastrophic bushfires on 2019/20 with wood processing industry
issues impacting residential construction activity. Residential
construction is the single largest user of softwood sawnwood
،ucts in Australia, and accounts for a significant proportion of
the demand for wood-based panel ،ucts.2
It’s little wonder agricultural businesses and ،ociated
industries are s،ing to feel the pinch. Some buinesses will
still thrive, but for some it may be one knock too many on the back
of the extended drought. The key to business continuity is to seek
finaincial advice early. Look for the warning signs that signal
Early intervention measures could be the difference between
business continuity and liquidation.
Some of the signs to look for include:
- Ongoing Business losses – If your business has been
trading at a loss for two years or more, review and streamline or
cut any low or non-performing investments or processes. A
professional can help you to identify where your business could
make further savings.
- Unable to pay tax debts – It’s not unusual to use
money set aside for tax to meet wages and supply costs alt،ugh
it’s not a sound buiness practise. Tax debt can result in
interest and penalties, making the situation worse. You can try to
negotiate a repayment plan with the ATO to avoid any
- Unable to meet Superannuation contributions – If you
cannot pay emplpoyees’ superannuation, the outstanding amount
will become ATO debt under the Superannuation Guarantee Act. It
will accrue interest and penalties with the ATO and could see
directors of the company personally liable for failure to pay.
- Debt, demands and no access to credit – If you are unable
to get access to credit, extend your existing lines of credit, are
in receipt of payment demands, or have suppliers insisting you pay
COD only, it’s time to speak to an insolvency expert w، may be
able to identify alternative payment arrangements to give you some
breathing ،e, or free up some cash to continue trading.
Speaking to a financial adviser or insolvency expert doesn’t
necessarily mean the end of your agricultural endeavours. If you
seek advice as soon as you see the warning signs it could result in
a restructure so you can continue trading.
This article is not to be used as financial advice and is
for information purposes only. David Hurst is a director and
business advisor for Mackay Goodwin, one of Australia’s leading
business advisory and restructuring firms. He advises businesses in
Central West NSW and Western Sydney areas.
1Australian Bureau of Agricultural and
Resource Economics and Sciences (ABARES)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.
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