Business structures are an important way to provide for business growth, managing tax, asset protection and succession planning. Unfortunately, many business owners’ structures are not optimised for their needs.
The owners of a rural supplies business fell victim to their previous adviser’s short-sightedness. In particular, their business structure unnecessarily:
- Exposed their house, personal and critical business assets to risks associated with operating a business
- Limited the flexibility needed to support their future growth plans
- Prevented using tax losses associated with a new venture
- Limited access to the corporate tax rate and increased overall tax payable
We undertook a review of our clients’ business structure by:
- Recommending a business structure that suited their current and future needs
- Giving specialist tax advice on the tax consequences and available concessions of a proposed restructure
- Implementing the restructure, including:
- Forming a new holding company
- Selling the shares in the existing trading company to the new holding company
- Selling business operated by the unit trust to a new trading company
- Winding up the existing unit trust
- Valuing the business and shares
- Overseeing the resignation of directors, share transfer, tax elections and ASIC lodgements
- Removing the trading company director from the main residence title.
The benefits of the restructure were significant. These included:
- Improved asset protection for $1.5m in current assets and protecting future wealth
- Greater flexibility to support ongoing business growth plans
- Locking-in a $1.3m cost based on their interest in their businesses
- Saving $270,000 in capital gains tax
- Tax savings on a deductible interest expense of $25,000 per annum, along with other annual tax savings resulting from better group tax position management
- Improved business sale value and saleability.