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09/09/2021

We had the pleasure in recently presenting at an online webinar for Television Education Network relating to Taxation of Trusts: A Practical Guide for Junior Accountants.

The webinar sought to provide a practical guide on the various tax and legal issues that may arise when preparing a trust distribution resolution dealing with income received for family/discretionary trusts.

For free copy of the full presentation and complementary paper, please visit: https://dariuschats.github.io/

Hope you enjoy the paper as much as we did presenting it!

We had the pleasure in recently presenting at an online webinar for Legalwise relating to Queensland State Taxes: Tips a...
26/02/2021

We had the pleasure in recently presenting at an online webinar for Legalwise relating to Queensland State Taxes: Tips and Traps for 2021.

The webinar explored:
✔️ opportunities to access a stamp duty exemption when moving your business into a company structure;
✔️risks for property developers in triggering greater stamp duty; ✔️issues for foreign residing persons holding land in Queensland (including through a company or trust);
✔️potential payroll tax aggregation rules (for business owners with either multiple businesses or family members with unrelated businesses).

For free copy of the full presentation, please visit: https://dariuschats.github.io/

Hope you enjoy the paper as much as we did presenting it!

Employee or Independent Contractor? 🤔Our recent article with Legalwise explores a recent Court decision in determining w...
17/12/2020

Employee or Independent Contractor? 🤔

Our recent article with Legalwise explores a recent Court decision in determining whether a Dentist was classified as an employee (in which case workplace rights may be available under the Fair Work Act 2009) or an independent contractor.

The full article can be found at the following link: https://legalwiseseminars.com.au/employee-or-independent-contractor-a-dental-example/

29/09/2020

We have the pleasure in presenting at the upcoming Television Education Network's lunchtime online conference: Estate Planning Techniques to Protect the Citadel.

Our topic of choice relates to business succession planning and the tax and estate planning considerations.

Please feel free to download a copy of the paper to be presented on from our presenter's personal website (along with other presentation materials): https://dariuschats.github.io/

24/07/2018

So far, we have mainly focused on a single person investing. What are some issues to be aware of if there are multiple individuals or families looking to invest or operate a business together?💁‍♀️

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👫 If it is a joint investment then most of the time, a company would be the way to go, certainly if it is a way of a trading business.
✔️ This is because a company can have multiple
shareholders, so you can proportion the
shareholding based on the percentage each
investor wants to have in the company.

💹 If it is a passive investment, then probably the most common structure you would see if to have multiple trusts owning an asset in partnership.
✔️Each investor would set up their own family trust and
then those trusts would purchase the asset as a
partnership.

Regardless of how you invest a critical consideration is putting agreements in place to ensure that future disputes between the investors can be resolved quickly and appropriately.

📚The agreement could look at issues such as:
✔️agreements for ‘involuntary’ events – such as what
happens if a partner dies or loses capacity; and
✔️agreements for ‘voluntary’ events – including when
someone wants to retire, sell their shares or change
the nature of the relationship between the parties.

Now we want to get this agreement in place while everyone is getting along, not down the track when there has been a breakdown in relationship between the parties.

Paying professional fees is not something anyone gets excited about, however, getting proper advice from an accountant and lawyer before you invest in an asset or start a business will often pay for itself many times over down the track by making sure that structure is getting the best possible tax outcome for the individuals, ensuring it offers sufficient protection for the personal assets of the individual and eliminating the need to take future steps to restructure.
... Think of it as an investment. The professional fees
will eventually pay for itself down the track.

19/07/2018

💭Getting Structures Right from the Start📚

"Why should we care about structuring properly from the start? Why not just do it one way now and take steps to change it at a later point in time?"

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This is a constant dilemma that business owners face. That is when they are starting up a new business, do they invest the time and money upfront to get a structure right, or do they just go off with something simple in the short time and then try to change that structure if the business becomes successful.

There’s real benefit in trying to get the structure right from the start as both the Federal and State government does not make it easy to change a structure once a business is up and running and if a business has been running for a period of time and it becomes necessary to change the structure, there are both tax and stamp duty costs that can arise. There are also the associated professional accounting and legal fees to change the structure. While there are specific exemptions for certain types of business restructures, it is almost guaranteed to be a far more time consuming and expensive exercise that getting the structure right from the start.

09/07/2018

Is there a general rule of thumb that people follow when looking to invest, whether that be by way of passive investment or as a business? 🤔🤔

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The general rule for passive investments, that is somebody goes out to invest in shares or a property that they are looking to rent out, they would generally prefer to do that in a trust environment instead of a company because a trust offers a few more benefits over a company, including access to
a tax discount on the sale of passive investment assets.

Where you are dealing with business assets, it is a much harder discussion as a trust offers benefits to a small business owner as does a company. However, utilising trusts for small businesses can often be a more complex to administer and the tax rules around trusts are significantly more complicated than they are for companies.

So companies have the advantage of offering a 27.5% flat
tax rate to small businesses whilst a trust is subject to an ever expanding and changing world of laws and ATO interpretations.

📌Note: The tax rules around these structures are continually getting more complex and even during the life of the investment, one structure will offer more advantages than another depending on what stage the investment is at. It’s important to have a proper understanding of the various factors that impacts the appropriateness of each structure that can be complicated by having multiple partners in a business and looking to sell the investment.

***A big qualifier here that anyone looking to invest should obtain specialist advice as the appropriate structure can differ
based on various other factors.***

A trust is an arrangement where one person (who we call the trustee) holds assets for somebody else or a range of people...
12/06/2018

A trust is an arrangement where one person (who we call the trustee) holds assets for somebody else or a range of people (who we call the beneficiaries).

The most common type of trust we see is what we call a family trust or a discretionary trust, and the idea there is you have either a person or a company who acts as trustee and owns all the assets and makes all the decisions in relation to
those assets.

However, the financial benefit of such actions flows to a range of discretionary beneficiaries who are normally members of a family. So if in any financial year the ‘trust’ generates $10,000 profit, the trustee can decide how to distribute that profit between those beneficiaries
(being the family members), and the trustee can make such decisions in the most tax effective manner possible.

The trust also offers some asset protection benefits as none of those individual family members has a strict legal ownership of the trust assets, whereas if you look at a company, those individuals who are the shareholders own the assets of the company and hence why they are exposed to the value of what they put in.

This can be contrasted with the family trust as no beneficiary is entitled to the trust assets and their benefit is subject to the trustee deciding that they can receive either the income generated by the trust or the underlying assets held in the trust.

In this way, no single beneficiary is entitled to what’s in the trust so there’s also protection in that what is owned by the
trust is protected by any lawsuits against any beneficiary.
That does not mean assets held in a trust are bulletproof, someone must still be liable for the debts of the trust, and it is the person who acts as trustee for the trust. This is because that person legally owns the assets of the trust and would also have to take on such debts owed by the trust.

Therefore, it is common to have a company to act as a trustee for a trust.

12/06/2018

How does a company achieve:
🏠 asset protection,
🤑tax planning and
👨‍👩‍👧succession planning benefits?

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📌ASSET PROTECTION:
So one of the vital aspects of a company is a concept that the lawyers call "LIMITED LIABILITY" which means that if you are a shareholder of a company and you paid $100 to have shares in the company, that’s the most you will ever be liable for if the company goes bankrupt.

This means that as a shareholder, you are isolated from the risks of the company and only liable to lose as much money
as you put into the company.

So from a small business perspective, if you contrast using a company with that example of a builder or tradie running a business as a sole trader by themselves, for the sole trader all their personal assets are exposed if someone sues the business. That’s a terrible outcome, whereas if that person
used a company to undertake the relevant work and that individual was a shareholder, the company is the entity being sued and the individual’s liability is only limited to the value of their share in the company. The company’s other assets, however, would be exposed but that wouldn’t include the
individual’s family home or personal assets.

Now the asset protection benefits are subject to some important qualifications which allow an individual to be responsibility for debts or claims relating to a company, including workplace and safety legislation, company legislation and tax legislation, but that legislation is there to ensure proper prudent steps are being undertaken so people are not impacted in an adverse manner from unreasonable decisions being made by the directors.

📌TAX PLANNING:
A company only pays a rate of tax of 30% if it is not considered a ‘small business’ and 27.5% as of March 2018 if it is considered a ‘small business’. That’s a flat rate from the profit the company generates compared to an individual whose tax rate can go as high as 47%.

📌SUCCESSION PLANNING:
A company can have a change of shareholder or a change of director and as far as the outside world knows, they are still dealing with the same legal entity. This makes it simpler when
either passing control down to other family members or selling it to a buyer as the face of the entity remains the same to the public. That is, you do not have to change contracts with suppliers or third parties as they are still engaged with the same company.

Qualifier: Anyone looking to make changes to company should obtain specialist tax advice to confirm
whether there are any adverse tax or stamp duty consequences in relation to the proposed change.

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