Following a transition year, the new Common Agricultural Policy period, starting in 2015, is expected to bring a number of major changes in the payment scheme of Pillar 1. Using the example of the Austrian small ruminant sector (sheep and goats), this paper describes the effects of an area-based payment scheme instead of the Single Farm Payment Scheme applied previously. The calculations are based on the specifi cation and simulation of seven different farm models and on an analysis of the Austrian Integrated Administration and Control System data sets. The results of both analyses suggest redistribution effects in favour of less extensive farm management systems. However, farms with high single farm payments per hectare are expected to face big cuts in direct payments by 2015. To avoid hardship the amount of the payments will be gradually amended over the coming years until 2019.