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20th National Tax Intensive Retreat: Expanding the Family Business

Published on 08 Nov 2012 | Took place at Sheraton Noosa Resort and Spa , National

    The theme of this years' retreat – Expanding the Family Business – focused on taking a successful small business and growing it into a very successful large business, with a particular emphasis on tax (as you would expect!).
    The journey involved:
  • restructuring at the outset (when the initial structure may not be suitable for the owners’ changing circumstances)
  • rewarding and retaining key personnel
  • critical issues associated with forming tax consolidated and GST groups
  • avoiding penal tax outcomes when operations are financed through profits taxed at the corporate rate
  • identifying and dealing with intellectual property and goodwill (including licensing)
  • extracting value through earnouts, dividends and share buybacks
  • once the business has been successfully sold, dealing with the benefits that have accumulated in the superannuation fund.

Get a 20% discount when you buy all the items from this event.

Individual sessions

Structuring and restructuring the expanding business

Author(s):  Gil LEVY

Microbusinesses grow into small businesses, which in turn expand into large businesses and, with a touch of luck and good management will become very large businesses. This paper is about keeping pace with the tax and commercial structures appropriate for the growing enterprise. Common examples of inflexible and inappropriate structures as the business grows will be examined.

The paper focuses on:

  • restructuring to better suit the owners’ changing circumstances
  • the income tax and GST implications of restructuring
  • creating better structures using CGT rollovers exemptions and demergers
  • transaction costs including stamp duty and GST
  • dealing with problem assets (know-how and WIP)
  • consideration of Part IVA.
Materials from this session:

Issues regarding SMEs and group structures

Author(s):  Paul LYON

A common outcome of restructuring a business is the implementation of a corporate group involving at least the holding company and a wholly owned operating subsidiary. To fully access the benefits of the corporate group structure often requires the implementation of a tax consolidated group and a GST group.

This paper examines the critical issues associated with forming a tax consolidated and GST group, including:

  • impact of the different CGT rollovers on the consolidations formation calculations
  • impact of not using CGT rollovers and relying on tax concessions such as the CGT small business concessions for the restructure
  • tax detriment that can result from the formation calculations including those from internally generated goodwill
  • opportunities to “uplift” the asset’s tax values
  • alternative restructure approaches to minimise the consolidations’ tax detriment
  • implications of the Part IVA rewrite.
Materials from this session:

Profit accumulation tax traps

Author(s):  Chris WOOKEY

By far, one of the greatest challenges facing SME businesses that operate through trust structures is avoiding the penal tax outcomes that are possible when operations are financed through profits that have been taxed at the corporate tax rate.

This paper examines some of the methods that have been developed to work with the new paradigm imposed by the Commissioner’s UPE ruling, including:

  • developing practices with corporate beneficiaries
  • lessons learned from completion of 2011 accounts
  • implications from the February 2012 Montgomery Wools Case
  • risks and opportunities through licensing goodwill.
Materials from this session:

You can't take it with you

Author(s):  Suzanne McKENZIE

So, the business is sold and it is time for your client to change gear and enjoy the wealth they have accumulated in their superannuation fund. However, it is not all plain sailing in the virtual world of tax-free superannuation and your client will need to consider how their superannuation assets will be dealt with following their death.

This paper covers the issues facing clients in retirement with significant superannuation wealth, including: 

  • tax-effective distributions to beneficiaries
  • dealing with superannuation assets still linked to a family business operation and issues for in specie distributions following death
  • the state of play with reversionary pensions and tax issues on ceasing a pension
  • dealing with control of the self-managed superannuation fund following the death of the principal member
  • the traps for binding death benefit nominations.
Materials from this session:

Workshop 1 questions and answers

Author(s):  Jo-anne HOTSTON

This workshop will examine in detail the issues arising from the papers:

  • Structuring and restructuring the growing business by Gil Levy
  • Rewarding and retaining key personnel of the growing business by Robert Jeremiah and Meagan O’Connor.
Materials from this session:

Rewarding and retaining key personnel of the growing businesss

Author(s):  Meagan O'CONNOR,  Rob JERAMIAH

Key employees are vital to the continuing growth of the business. They will be retained and innovate if rewarded appropriately. This paper is about the important issue of employee remuneration and its tax consequences for both employer and employee.

The issues which will be considered include:

  • providing equity in the business while retaining family control
  • the interaction between Div 83A and executive share and option plans
  • alternative remuneration strategies, e.g. phantom share schemes
  • sign-on incentives and other bonus arrangements
  • funding of employee incentives
  • thinking ahead – impact on the structure and exit/succession planning.
Materials from this session:

Workshop 2 questions and answers

Author(s):  David MARSCHKE

This workshop examines in detail the issues arising from the following plenary sessions:

  • Issues regarding SMEs and group structures by Paul Lyon and Angie Hicks
  • Profit accumulation tax traps by Chris Wookey
  • Intellectual propery, goodwill and taxation.
Materials from this session:

Workshop 3 questions and answers

Author(s):  Michelle HARTMAN,  Kevin J MUNRO

This workshop examines in detail the issues arising from the following plenary papers:

  • Extracting Moira value by Moira Merrick and Peta McFarlane
  • You can't take it with you by Suzanne McKenzie.
Materials from this session:

Intellectual property, goodwill and taxation

Author(s):  Domenic CARBONE

Intellectual property (IP) and goodwill are the life blood of a modern growing enterprise. Think of the business names, logos, and trademarks which are avidly protected by international corporations because they are the back bone of their enterprise value. It is easy to confuse the value of IP and goodwill when a business is sold. This paper identifies the essence of these assets and the taxation consequences which follow when dealing with them.

This paper covers:

  • identifying goodwill and distinguishing it from IP
  • the source of goodwill in intangible assets
  • structures for holding IP
  • interplay with R&D concessions
  • Capital gains tax issues: determining the appropriate cost base, termination value and the interaction with Div 40
  • goodwill licensing and franchisees’ goodwill (Just Jeans issues)
  • creation of IP outside of Australia (original copyright)
  • TR 2008/7 on royalty withholding tax and assignment of copyright.
Materials from this session: