The federal government will help new farmers looking to purchase or establish their own farm by guaranteeing 40% of their commercial loan, as rising land values and access to capital become the main barrier to ownership.

Minister for Agriculture David Littleproud unveiled the new pilot and will trial an 18-month $75 million Future Farmer Guarantee Scheme by securing an eligible new farmer’s commercial loan up to a maximum value of $1 million.

The scheme is expected to open 1 January 2023.

Littleproud said the scheme would assist experienced farmers to address the number one barrier to establishing their own farm business – access to capital.

He said existing landholders are ageing – the average broadacre farmer is 62 years old, with only 10% aged under 47.

“Rising land values and the typical 40 to 60% equity deposit required by commercial banks without this Government guarantee mean that getting access to a bank loan to start a viable business is very difficult.

“This support will help families access capital to assist with succession planning, as well as help those families and farmers getting into ownership for the first time.”

Littleproud said the government sharing the risk means that the bank can offer better terms to suitable applicants – lower interest rates and lower equity requirements.

“Lowering the barriers for ownership for our future farmers is an investment in the future of regional Australia,” he continued.

The minister stressed the scheme is not “a free for all”.

New applicants must have at least three years of relevant on-farm or equivalent experience.

The program will help first time farmers seeking to purchase, establish or develop a farm business in which they hold or will hold the sole or controlling interest.

It is also be open to first time farmers seeking develop either a recently established or acquired farm business and farm business successors and farm asset successors to assist with succession arrangements, as well as first time farmers seeking to enter into lease or share farming arrangements.

The eligible loans will have a maximum term of 10 years, with an option to extend the loan term by two years for applicants who are experiencing significant financial hardship. The maximum Loan to Value Ratio will be capped at 70%.

The government will provide $1.45 million to the Regional Investment Corporation to administer the program, and commercial lenders participating in the scheme would provide loans for eligible applicants on terms agreed between the commercial lender and the farmer.