In my consulting time, the expansion playbook for Western Australian growers was fairly simple: you either bought the neighbour’s block or you leased it.
Buying offered the ultimate prize—retaining all operating profits plus 100% of the capital growth—but required a strong balance sheet and the appetite to stomach both land and operational risk. Leasing offered a lower barrier to entry and leverage, but the lessee took on all the seasonal risk while the landowner enjoyed a fixed, guaranteed return, regardless of whether the sky opened up or stayed dry, while in recent years also obtaining a handy capital gain.
However, in my recent consulting work, I’ve noticed a distinct shift. More and more growers and landowners are asking about sharefarming models. The good years have been very good, and the lease returns, while consistent, have not kept pace with the increase in land values. The “middle ground” of sharefarming looks to be back in fashion.
Why Now? The Drivers of the Shift
The resurgence of sharefarming isn’t accidental; it’s a response to the current economic climate in WA:
- Capital Preservation: In the 1980s, Gordon Gekko famously declared that “greed is good.” While that might be a bit strong for sharefarming, in a financial sense, we are seeing a return to calculated ambition. Landowners are no longer content with the “safe” but static return of a standard lease; they are looking to capture the “greed is good” upside of the boom years we’ve seen recently. They are willing to take on seasonal risk to chase a significantly better return.
On the flip side, for the Sharefarmer, this isn’t about being greedy—it’s about being smart with capital. If a traditional lease isn’t on the table, or the “all-in” cost is too high, sharefarming allows them to expand their “footprint” and leverage their machinery plant without the choking debt service of a new mortgage or the soul-crushing upfront cash flow drain of a lease. It’s a model where both parties agree that chasing a better margin is a goal worth sharing.
Of course, unlike Gekko, a WA sharefarmer knows that ‘greed’ only works if you’ve checked the rain gauges and the UAN is in the tank first. - The Rise of the “Professional Operator”: As machinery becomes larger and more technologically advanced, some landowners find it more efficient to “outsource” the operations to a neighbour who has the scale to run the new seeding gear, controlled traffic or the latest weed-sensing technology.
- Risk Symmetry: Sharefarming realigns the interests of both parties: when the season is a “boomer,” everyone wins big. When it’s tight, the pain is shared.
The Anatomy of a Modern Sharefarm
In a general sense, the advantage of this model is shared inputs. Typically, we see models where variable costs (fertiliser, chemicals, seed, freight, insurance) are split. The landowner foregoes a guaranteed lease cheque in exchange for a percentage of the crop, while the sharefarmer provides the machinery, labour, and operational expertise. 50:50 is not the guaranteed rate nowadays, given the cost of machinery, so working on agreed rates beforehand is important.
However, a “handshake deal” no longer cuts it in the eyes of the law or the tax office.
The Tax Reality: One of the most common misconceptions I encounter is the belief that simply taking a small percentage of the final grain—say, 15% of the delivered grain transferred to the landowner, with zero contribution to inputs—constitutes a sharefarming agreement.
In reality, this is not sharefarming; it is effectively a variable rate lease. Under the ATO and the law, the distinction is clear: if the landowner provides no “skin in the game” through variable costs (seed, fertiliser, chemicals) and bears no genuine operational risk, they are likely a passive landlord rather than a primary producer.
This “15% model” lacks the shared input requirement necessary to claim primary production tax status, potentially leaving the landowner ineligible for Farm Management Deposits (FMDs) or primary production tax averaging. If you aren’t sharing the cost of the urea, you aren’t sharefarming.Shape
Getting the Tools in Place: CBH and NGR
One of the most common mistakes I see is failing to set up the delivery accounts correctly before the headers start rolling. To ensure transparency and clean accounting, I recommend the following:
- Separate CBH Delivery Numbers: Do not mix sharefarm grain with your “home” business grain. Register a specific CBH delivery number for the sharefarm entity. This allows for automated “Split Deliveries” at the bin, ensuring the 50/50 or 60/40 (or whatever your split is) is handled at the point of sale.
- Unique NGR Numbers: Register a separate National Grower Register (NGR) number for the particular sharefarm. This is essential for the correct payment of End Point Royalties (EPRs) and ensures that harvest declarations are accurate and legally compliant for both parties.
Pros and Cons at a Glance
| Feature | For the Landowner | For the Sharefarmer |
|---|---|---|
| Upside | Taking on seasonal and market risk can significantly outperform lease rates in high-yielding years. | Access to newer machinery and production systems without upfront costs.
Lowers the “breakeven” point compared to a high-cost lease. The expansion spreads fixed costs over a larger area, enhancing economies of scale. |
| Downside | Forgoes the lease income.
Must share the “profits” which can be large in a good season (although if a lease is not on offer it is the best of the situation on offer). |
Being exposed to seasonal and market risk can result in less income if the crop does not meet expectations. |
| Management | Retains a say in rotation and soil health. | Gains access to land without the burden of land debt. |
Summary
Sharefarming is no longer just a “stepping stone” for young farmers; it is a risk-management tool for the modern WA broadacre enterprise. By sharing the inputs and the risks, both parties can build a more resilient business.
The key to success? Clarity. A written agreement that outlines input splits, management decisions, and clear roles for each party, the difference between a profitable partnership and a costly dispute.
