Farm debt restructure: resetting the loans so the farm can breathe

What does it mean to restructure farm debt?

To restructure farm debt is to change how the borrowings are organised, not just who holds them. The aim is a set of loans whose repayments, terms and security match what the farm genuinely earns across good years and bad ones.

Farms often end up with a patchwork: a land loan from one lender, machinery finance from a dealer, an overdraft, a family loan, perhaps a tax payment plan and a couple of trade accounts running late. Each was sensible when taken out. Together they can strangle cash flow. A restructure puts it all on one page and rebuilds it deliberately.

When is a restructure the right move?

Common triggers include:

• Several short facilities falling due close together
• Repayments sized for a boom year but now facing a normal or lean one
• Overdrafts sitting at the limit for months
• A loan about to roll off a fixed term or interest-only period
• Machinery repayments squeezing seasonal working capital
• A change in ownership, family structure or succession plans
• An ATO debt that needs a longer runway
• A lender that has become uncooperative or has changed its rural appetite

If you are already behind, read our farm loan in arrears help page too. The sooner a restructure starts, the more choices exist.

What restructuring tools are available?

Tool	What it does	Typical fit
Consolidation	Combines several debts into one facility	Many small loans, high administration
Term reset	Lengthens the repayment period	Repayments too heavy for current cash flow
Facility split	Separates land debt from seasonal working capital	Farms with uneven income
Refinance to a new lender	Replaces the facility entirely	Current lender inflexible or exiting
Second mortgage	Adds funds behind the first lender	First lender will not vary but extra funds are needed
Asset sale or lease-back	Frees up capital	Surplus land, plant or stock
Interest-only period	Reduces repayments for a time	Short-term recovery plan

No single tool is right for everyone. A workable plan usually combines two or three, with a clear view of how the farm gets back to a stable footing.

What are your rights under state farm debt mediation schemes?

If your lender is moving toward enforcement, farm debt mediation may apply. The Australian Government’s Department of Agriculture notes that New South Wales, Victoria, Queensland and South Australia have legislated schemes, while Western Australia has a voluntary one. Tasmania has also passed a Farm Debt Mediation Act, in 2024. A national approach was recommended by the 2019 Royal Commission but is not in place, so rules depend on your state.

In broad terms:

• New South Wales. A creditor must invite the farmer to mediate in writing before enforcing a farm mortgage. The farmer then has 20 business days to respond. If no agreement is reached, the creditor can apply for an exemption certificate. The NSW Rural Assistance Authority runs the scheme.
• Victoria. Creditors must offer mediation before starting recovery on a farm mortgage, and the Victorian Small Business Commission manages the process. The government subsidises the cost of attending.
• Queensland. Mediation is required before a mortgagee can take possession or take other enforcement action. QRIDA administers it, and a farmer can also request mediation whether or not they are in default.
• South Australia. A legislated scheme under the Farm Debt Mediation Act 2018.
• Western Australia. A voluntary scheme run by the Rural Business Development Corporation with the Small Business Development Corporation.

The process is confidential and the mediator does not make decisions. It gives you a structured table to negotiate at, and a financial counsellor can come with you. Details change, so check the relevant agency and a solicitor or counsellor about your own position.

How does Ownright approach a farm debt restructure?

Trevor Scott has spent more than 40 years in finance, and the Ownright team is used to files where the numbers do not line up neatly. A restructure is rarely about finding the loan with the best headline; it is about finding the structure that survives a bad season.

We map your borrowings, test the cash flow, and then look at both traditional and less-known lenders. That can include specialist rural lenders, private lenders and combinations such as a restructured first mortgage plus a short-term facility to clear urgent items. We work with your accountant, solicitor and financial counsellor so the plan is coherent. Start with a no-pressure chat by making an enquiry.

An illustrative example

This example is illustrative only and does not describe a real client. A beef and cropping operation has a land loan, two machinery loans, an overdraft at its limit and a payment plan with the ATO. After two dry years, nothing is technically in default, but there is no room left. A restructure consolidates the machinery and overdraft debt into a facility with a longer term, keeps the land loan separate, and builds the tax payment into the new plan. Repayments now match a normal year rather than the best year the farm ever had.

Mistakes to avoid

• Waiting for a formal default notice before acting
• Restructuring only the largest loan and leaving expensive small debts untouched
• Choosing a structure that works only if the season is good
• Skipping a conversation with a financial counsellor, who can help for free
• Signing a restructure without understanding the security, cross-collateralisation and exit

Documents to have ready

• Statements for every loan, lease and overdraft
• Last two years’ financials and tax returns, if available
• ATO account balance and any payment plan details
• Current budget or cash flow forecast, even a rough one
• Rates notices, titles and details of any other security
• Any correspondence from your lender about arrears or review

Help that costs nothing

The Rural Financial Counselling Service provides free, independent and confidential support to farmers, fishers and foresters in hardship or at risk of it. Counsellors can build budgets and cash flows, help prepare an action plan and negotiate with lenders. Call 1300 771 741 to reach your nearest office. Farm Household Allowance may also be available to eligible farming households through Services Australia.

How do I know how much debt the farm can carry?

Debt capacity is less about a single ratio and more about whether repayments can be met in a below-average year without selling assets. A sensible test uses three lenses at once:

• Normal year. Income and costs based on the average of several seasons, not the best one.
• Lean year. The same costs with reduced income from a poor season, a price dip or a lost contract.
• Shock year. A bigger event, such as a flood, fire or major repair, and how the farm would fund it.

A restructure that only works in the first lens is a delay, not a solution. Rural financial counsellors and farm business advisers can help build these scenarios, and a lender will take a plan more seriously when it has been tested. We help translate the output into a loan structure.

What is the difference between restructuring and refinancing?

The two overlap, but they are not identical. A refinance moves debt to a new lender, often on better or more suitable terms. A restructure changes the shape of the debt, whether with the existing lender or a new one. You can restructure without refinancing, for example by negotiating an interest-only period, and you can refinance without restructuring if the debt simply moves across unchanged. Most farm situations benefit from both: new terms and a new shape. Our farm debt refinance page covers the lender-change side, and rural refinance takes the wider view.

How do you negotiate with an existing lender?

Many restructures begin with a conversation rather than a new loan. Lenders generally prefer a workable plan to enforcement, particularly when the farmer comes forward early. A good approach usually includes:

1. A current cash flow forecast, even if it is rough, showing how the farm will meet the proposed repayments.
2. A clear statement of what has changed and what you have already done about it.
3. A specific request, such as an interest-only period, a term extension or splitting a facility.
4. Evidence supporting the request, such as milk statements, forward sales or confirmed off-farm income.
5. A financial counsellor or adviser present or involved, if you wish.

If the lender will not budge, you will at least have a prepared file ready to take to another one. Our guide on refinancing farm debt step by step shows how that file is assembled.

What do restructuring lenders want to see in the plan?

A lender asked to take on or reshape a stressed farm is looking for credibility. They tend to respond well to:

• A realistic budget that includes living costs and tax
• Specific actions already taken, such as selling surplus stock or machinery, cutting costs or lifting off-farm income
• An honest view of the commodity cycle and weather exposure
• Evidence that the family and any other owners are aligned
• A staged path back to a standard facility, with milestones
• Open disclosure of ATO and creditor balances

A plan with these elements shows that the farm has a way forward, which matters more than the size of the problem.

How does family and succession complicate a restructure?

Farm debt is often wrapped up with family. Several households may rely on one business, parents may have guaranteed loans for their children, or a transition may be underway with some siblings staying and others leaving. A restructure that ignores these relationships can solve the numbers and break the family. Lenders will want to know who owns what, who guarantees what and what the long-term intentions are. We encourage early involvement of everyone affected and a solicitor who understands rural succession. Our farm succession finance page and the guide on farm succession and finance deal with the transition side.

Can a restructure include an ATO payment plan?

Sometimes. An ATO debt can sit alongside a restructure if the plan shows it will be met, or it can be cleared through a new facility if the security and cash flow allow it. Lenders vary in how they treat tax debts, and a payment plan being kept up is generally viewed more favourably than one in default. The refinancing ATO debt page explains secured options, and your accountant can confirm the current position with the ATO.

Where to from here?

When you are ready, tell us about your debts and we will sketch the realistic paths. For the refinance side of the story, see farm debt refinance and our guide on refinancing farm debt step by step.