A lot has changed over the past two years. As business owners take stock, many are questioning whether the business structure they established years ago remains appropriate for their needs, particularly in regard to tax benefits and asset protection.
As the business environment and your personal situation evolve, it is wise to review your business goals and structure to suit both changing legislation and to meet your own personal circumstances.
Catalysts for change can include business growth or expansion, bringing in a new business partner, or a change in family dynamics for you or a business partner.
If you are developing a succession or business sale strategy, for example, a different structure may better facilitate your exit while providing greater protection of your personal assets and improved tax savings.
Having an appropriate and well set up business structure can also benefit your business and create tax efficiencies throughout the life of the business. For example, establishing a trust structure may help you reduce tax liabilities through the ability to income split or vary distributions each year.
Moving to a company structure could help you take advantage of a lower flat tax rate and avoid the marginal tax rates that apply to sole traders and partnerships. Some business structures may offer tax concessions for research and development activities, as well as for the sale of assets.
The ability to separate assets from business activities can also protect your assets in the event of litigation and reduce your exposure to creditors. If your personal and business assets have grown, it may be time to separate your personal and business affairs.
There can be other benefits to restructuring your business, including greater flexibility for financing and borrowing arrangements. This may also include the ability to more easily transfer assets or control of the business.
Good news for business owners considering a restructure…
The ‘small business restructure rollover’ laws allow a small business (less than $10 million annual turnover) to change their legal business structure without incurring a tax liability on the transfer. The turnover threshold was increased from $2 million to $10 million from 1 July 2016, however the $2 million threshold remains for the CGT 15-year asset exemption.
There are some impacts of restructuring which may also affect your business’ eligibility for COVID-19 grants. As always, we advise caution and encourage you to lean on us for guidance.
Seeking professional advice will help you to understand which options are most appropriate for your business, personal situation and future goals.
For more information about preparing your business for its next phase, please contact Rosenfeld Kant on (02) 9375 1200 or email gary@roskant.com.au, raul@roskant.com.au or elias@roskant.com.au
Partnering with you to deliver efficiencies, growth and success for your business.
The information (including taxation) contained within this article is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Rosenfeld Kant strongly suggest that no person should act specifically on the basis of the information in this document but should obtain appropriate professional advice based on their own personal circumstances.