What We Do For Your Business
We provide businesses and their owners with tax advice that covers all the significant milestones in their evolution including those detailed here.
Should you buy the business or buy the entity. We are able to guide you through the tax consequences of each option. We can help you with the tax due diligence to help identify tax risks should you choose to buy the entity and advise on an appropriate structure acquisition should you buy the business assets. We can liaise with your legal advisors to ensure the purchase contract contains appropriate clauses to protect your interests.
Should you use a company, a trust or some other entity? Should you use an existing entity or should you use a new entity? We will recommend the most appropriate structure for your business or investments having regard to issues including capital gains tax on exit and the tax rate on income. We will also identify the set up and compliance costs and highlight other commercial issues such as asset protection which you may wish to follow through with your legal or other advisors.
This term can mean many things but often involves the proprietor’s focus on returning funds invested or paying out profits. This can be achieved by mechanisms such as capital reduction or capital return, dividends, share buybacks and other means. We are able to highlight the tax consequences for each and guide you through the multitude of anti-avoidance rules which potentially apply to such transactions.
Businesses are essentially funded by either equity or debt. In some situations the form of the funding can determine whether or not something is equity or debt. This in turn, determines whether or not the return on those funds is regarded as a dividend or regarded as interest. Likewise, there are rules and guidelines which determine when interest is deductible. We are experienced in relation to funding mechanisms and able to advise the most tax efficient way to deal with these matters.
Businesses often reach a stage where, for various reasons, it is desirable to change the structure within which the business operates. For instance, a sole proprietor may wish to transfer their business to a company. Other situations involve transferring assets to a new entity for asset protection or other reasons. In other cases it may be desirable to interpose a holding company within an existing structure. It may be necessary or desirable to change a business from a trust structure to a company structure. We have advised on many such restructures and are able to guide you through the alternatives available to minimise the CGT consequences such as highlighting when CGT rollover relief is available.
The question asked most often is whether or not it is more tax efficient to sell the entity or sell the business. Related questions are whether or not a dividend should be paid out of structure prior to its sale and quite often how outstanding proprietors’ loans should be resolved. We have been involved in many sale transactions and are able to highlight the CGT consequences and alternatives .We are also able to guide you through the related tax issues of the sale options including liaising with your legal advisers on any tax warranties or indemnities that may be required as part of the sale agreement.
Executive equity and incentives
Often the simplest way is to provide a cash bonus to employees. In other situations, the principals of the business are keen to provide executives with shares or options so they have some ownership in the business. We have been involved in establishment of numerous employee equity plans and are able to guide you through the tax consequences. We can assist with the design of the plan and liaise with legal advisers in relation to development of the plan rules and information memorandum for employees and advise you on the ATO reporting requirements.
We distinguish succession planning from an outright sale of business in the sense that the proprietor continues to be involved in the business but is establishing a staged exit. A succession plan may involve transferring equity or part of the business to a family member or members or may involve issuing equity to key executives or the broader employee group. In other cases, the succession plan may involve rationalising or restructuring the business to put it in a format to make it “sale ready”. We are able to provide solutions and highlight the traps so that you do not incur unintended CGT liabilities or freshen up pre CGT status.
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Estate planning involves much more than preparing a Will. Quite often, business people will control entities such as trusts and will also have assets owned within a self managed superannuation fund. Your estate planning needs to deal with all of these assets, recognising that some of them cannot expressly be dealt with within your will. We are able to outline the tax consequences to your estate and your beneficiaries of alternative courses of action. We can advise you in relation to the tax consequences of the bequests provided within your will, the creation of testamentary trusts and statement wishes and are able to liaise with your legal advisers in relation to creation all these documents.
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The ATO has aggressive guidelines for the review and audit of private business covering many areas. Businesses and private investors will be fortunate if they do not face and ATO desk audit, risk review, comprehensive review or tax audit at some stage during their life cycle. We are able to assist with the response to questions from the ATO and are able to prepare objections, references to the Administrative Appeals Tribunal and negotiate with the ATO in relation to outstanding tax liabilities.
Many Australian businesses seek to expand their operations through establishing an offshore presence. There are many questions to answer such as the appropriate offshore structure, how the entity should be funded and what the Australian tax consequences are in relation to profit repatriation and ultimate sale of the entity. We are able to provide you with advice in relation to the Australian consequences, Double tax agreements with the relevant offshore country, where one exists and also liaise with the foreign advisers in establishing the best and most efficient structure for your operation.
Private charitable funds
Many wealthy individuals seek to establish their own charitable fund so that they are able to direct their charitable giving. We are able to liaise with your legal advisers in establishing such a fund and also advise you of the issues for complying with the tax rules.
We are also able to seek the relevant endorsements from the ATO for charitable status for other types of entities.
Examples of Client Assignments
The following is a brief overview highlighting some of Ray’s advice;
- Advice in relation to establishment of an employee option plan for a private business outlining the tax position in relation to the issue of options compared to an issue of shares
- Assisting high wealth client in relation to ATO comprehensive risk review including making voluntary disclosures to ATO and negotiating settlement position in relation to underpayment of tax
- Analysis of differing scenarios for the subdivision of property and consideration of income compared to capital gains treatment
- Succession planning relating to business structure to allow for entry into the business by children of the founders involving consideration of CGT issues associated with family companies and trusts
- Assistance with alternative sales scenarios comparing sale of corporate structure to sale of business including tax timing issues and availability of small business CGT concessions
- Capital management issues for a private company involving analysis of share capital return, dividends and share buyback scenarios
- Estate planning for an individual including the potential establishment of a testamentary trusts for the benefit of children
- Review and recommendations in relation to appropriate structure for acquisition of a new business having regard to income flows and capital gains tax consequences on exit