To find the heart of Neil Armfield’s story, consider the theatre director’s parents. During the 1960s, his father Len ignored entreaties to leave the biscuit factory spouted by the man who ran his own insulating business and lived across the road from the Armfield family home in west suburban Concord. “You’re a mug,” the more affluent self-employed neighbour would scoff at Len, “you should leave Arnott’s.”

Len Armfield, who recently turned 85, gave close on 40 years to the company that had its famous factory at Homebush, working his way up to superintendent. Len’s own father had worked there, too, as an engineer. The Armfields had a good 90-year run at the factory all up, and the modesty of his wage of about 30 pounds, Len reasoned, was offset by the Arnott family’s commitment to its workers; a collaborative template that would one day influence the Sydney theatre scene through his youngest son.

Len met and married Nita, who had grown up around the corner in Homebush and, like him, left school at the end of third form. They would have three boys: first Ian, the budding linguist; then Ross, the future teacher; and finally Neil, the admittedly average actor who would go on to direct Geoffrey Rush in Exit the King to standing ovation on Broadway and coax likewise beautifully nuanced performances from Richard Roxburgh in Hamlet on stage and Heath Ledger in the feature film Candy.

At seven, young Neil himself was cast as a king in a Concord Public School play. The family lived at the swampy end of the Parramatta River near a golf course, where his brothers would pick up stray golf balls from the canal using suction cups on the end of sticks, so the imaginative Len cut down a couple of these sticks with balls attached, added chess pieces and gold fabric, and presented his son with a scepter and an orb for the stage: “I was just bowled over that Dad had made these two magical props.”

Almost 25 years ago, Armfield co-founded Surry Hills’ Belvoir Street Theatre, creating a theatrical family that shares not only a dressing room but also an ethos that even today pays the same hourly rate to each cast member – yet change is coming: some time later in 2010, the growing cost of living in Sydney will force a new, “fairer” pay scale at Belvoir based on a formula perhaps of role size and seniority; the details are still being nutted out.

About the same time, Armfield, the gentle but dogged Company B ringmaster with shaggy hair and schoolboy smile will take the monumental step of ending his long run as the only artistic director the small but influential theatre has known. “It would be pathetic to hang around forever,” the 54-year-old reasons with a laugh. Exit the visionary – with a long, deserved bow.

For now, he is staging The Book of Everything across Christmas and New Year; it’s classic engaging Company B fare, the story of a nine-year-old boy in short pants, Thomas, who can see what others can’t, and also features Jesus, some angels, the Bottombiter and a girl with a leather leg. As a child himself, Neil Geoffrey Armfield was “much more of a mummy’s boy” and would sit close while his mother played Albert Ketèlbey’s joyful In A Persian Market on piano, painting his imaginative world with music more so than books.

Len and Nita were only occasional theatregoers when the boys were growing up – they were fond of musicals – and for such special occasions his mother would wear a marmoset fur stole.

“I clearly remember the sound of her voice,” Armfield says of his mother, who took a job at a gas bottling company so the family could afford a car, “that sound you get when your head is against your mother’s breast; the incredible reassurance of that vibration.”

Len and Nita became avid fans of their son’s work, coming twice to virtually every production. After Armfield staged Twelfth Night, in 1984, Len, then 60, walked onto the empty set and, recalling his own schoolboy Shakespeare lessons, recited Orsino’s speech: “If music be the food of love, play on …”

Nita died in January 2007, while Armfield was directing Snugglepot and Cuddlepie. Len still faithfully comes twice to each play.

To find the soul of Neil Armfield’s story, however, consider the family’s great loss during his high school years. “There were these deep shadows in the family,” he recalls, “but the beautiful expressions of grief that I would witness and be a part of were very formative in my emotional responses to art.”

Monday, January 3 1972 was an average sunny Sydney midsummer day – the temperature reached 25 degrees – but perhaps all the Armfield family’s racing around etched the morning as hot in the director’s memory: eldest son Ian had to board the Fairstar to sail for France, Germany, Italy, Greece and England.

Years earlier, Ian would chase his little brother Neil with the threat of tickle torture. “We would never have declared it as love,” smiles Armfield, “it was just normal sibling victimisation.” Ian would join the Citizens Military Forces and play drums in a regiment band, but a late-teen diagnosis with the cancer lymphosarcoma and life at Sydney University studying linguistics changed him.

Ian grew his hair long, embraced “late-onset hippiedom” and grew fascinated with 19th century Romantic poets. He would quiz Neil who, though five years younger, displayed an uncanny knack for deciphering authors’ intentions and meaning behind their characters’ actions. Together, the Armfield brothers would pick over the ideas in works such as Thomas Mann’s novel Death in Venice.

That morning in 1972, Nita insisted her firstborn sit on her lap in the armchair. Patti McLoughlin, who has known the Armfield family since meeting Neil in the Sydney University Dramatic Society, or SUDS, says Nita’s gesture “was the extraordinarily unselfish act of love of a mother of saying goodbye to that boy, who they knew would never come back, allowing him to go have that experience, even though he was going to hit death so soon”.

“He knew he was dying,” confirms Armfield. “He didn’t want to come back to Australia because he didn’t want to be in a hospital bed and have everyone feel they had to come and say goodbye.”

One night, some months later, while 17-year-old Neil was at his desk studying for an HSC exam the next morning, his father walked into the room and gently placed his hand on his youngest son’s shoulder.

“He’s gone.”

Ian had died in Marseilles, aged 22. A temporary family madness boiled over; grief manifested as sudden family arguments would erupt under that suburban Concord roof.

Perhaps that experience explains why Armfield is an effective peacekeeper as well as interpreter of people’s emotions. Cut to 37 years later in 2009, when tensions are brewing within the cast of Exit the King over relative dressing room sizes at Manhattan’s Ethel Barrymore Theatre.

Broadway has a very unBelvoir-like culture: the dressing rooms are awarded according to salary, in turn determined by box office appeal. The situation was defused when Armfield rallied the cast to meet and chat after every performance in the “reception area” within Susan Sarandon’s dressing room – which, it should be noted, was of itself the size of a lounge room.

Armfield was less successful trying to get the fantastically cantankerous novelist Patrick White, with whom he had a “loving” relationship, to make peace with founding Sydney Theatre Company director Richard Wherrett, who would go on to write in his autobiography The Floor of Heaven that White was “a mean and nasty, vicious, cranky old man”.

In 1989, Armfield directed White’s play The Ham Funeral, and on opening night White thanked everyone involved – except, pointedly, their host, Wherrett. “Patrick didn’t like Richard, so that was awful, but it was that simple,” says Armfield, “and Richard was a bit frightened of Patrick.

“After the first reading of that play, Richard was making a speech, and Patrick decided it was time to do his eye drops, and so he opened his bag and started rustling ostentatiously through it,” Armfield laughs.

The toughest time for Belvoir came in 1994 – just when his acclaimed production Hamlet was on stage, starring Roxburgh, Rush and Cate Blanchett: “The cast didn’t know this, but the rest of the company went without pay. We were insolvent, really. We should have locked up the doors. It wasn’t very widely known.”

Geoffrey Rush, who will star in a reprise of Diary of a Madman for Armfield’s Belvoir swansong as artistic director in December next year, notes the boy from Concord is “not a cerebral director – he likes to take a play and dig into the absolute heart, and the storytelling of it”. Armfield reveals he and Rush have been inspired by Bugs Bunny and Daffy Duck’s “highly instructive” comic timing.

Success of course is only ever achieved with support, and another playwright, David Williamson, recently reminisced Sydney arts in the 70s were “dominated by a cultural group including Patrick White, Neil Armfield, Wayne Harrison, Jim Sharman, Leo Schofield and Barrie Kosky … I wouldn’t go so far as to call it a gay mafia but it certainly felt odd to be a heterosexual in Sydney.”

Williamson is “talking out of his arse,” offers Queensland Theatre Company artistic director Michael Gow, who too has known Armfield since the SUDS days, dismissing Williamson’s inference a male had to be gay to succeed in the arts as “nonsense”. Has Armfield’s sexuality influenced his art? “I think in the way Shakespeare’s did,” says Gow, “this polymorphous thing that you can embrace anything.”

As a Labor supporter who once said Paul Keating was “someone half the electorate could imagine going to bed with” and who in 1999 called on John Howard to “use the love that lurks inside your frightened body” and apologise to Aboriginal people over the stolen generation issue, Armfield, though he emphasizes he is “completely prepared to stand up and be counted”, has never really stood upfront the barricades on gay rights.

“I don’t see myself as a special interest kind of cause, but I think it is time [given] all this [current political] business about moral issues, which are simply connected to historical prejudice,” he reflects.

“There’s simply no reason why there shouldn’t be gay marriage for people who want to get married; it’s clearly where a caring and loving society needs to be moving.”

Sexuality, says Armfield, “influences everything about you – but I’m just me”. He’s single, incidentally. “I have a very loving relationship with my labrador Grace.”

With no intention of abandoning his Leichhardt home, Armfield will direct two more Belvoir productions next year, as well as some opera in the US.

He doesn’t rule out future directing gigs at Belvoir under incoming artistic director Ralph Myers, and hopes to make Melissa Reeves’s 2004 Belvoir play The Spook into a feature film. Otherwise, he explains, “I just want to stop for a bit and reconnect with who I am.”

The Book of Everything runs at Belvoir from December 23 to January 31. www.belvoir.com.au