Be structured about reviewing your structure

Article by Brant Jansen

as featured in the Farm Weekly issue 17 November 2022

When was the last time you reviewed your structure? I always start off any succession or planning meeting with a recap of a client’s structure. Even for clients that are well versed with their structure, it always generates healthy discussion around who controls what, who owns what and future planning points. Then there’s the clients that don’t understand their structure at all. It still surprises me the number of new clients I meet that have never been explained how things are setup and whether this is good, bad, or ugly! As we are leading into the review season next year, make it a priority to sit down with your advisers and review. Your structure should always aim to maximise asset protection, minimise tax, and be as flexible as possible for future succession to occur. 

Things to start with are: 

1. What’s your trading structure?  

  • Is it a partnership with individual partners? If so, then it’s probably outdated. 
  • Is it a family trust? Do you have individual trustees or a corporate trustee? Best practice is to have a corporate trustee. Who are the directors and shareholders? 
  • With a family trust, who is the Appointor and Guardian? Ultimately, they control the trust. Check your trust deed to see who this is. Does the trust deed deal with who the successor Appointor and Guardian will be? Or it may revert to what that person has in their Will. 
  • With a family trust, has the trust deed been reviewed for the Mercanti case? This is a whole topic on its own! 
  • With a family trust, are there unpaid entitlements/loans owing to other family members that may have been forgotten about? Check your financial statements. 
  • Do you have a company in your structure to take advantage of the 25% company tax rate? This tax rate is a lot cheaper than the top 47% tax rate for individuals. But note, Division 7A needs to be complied with and sometimes this can create some skeletons in the closet! 

2. How is the land owned? Often it can be a mixture of land owned individually, jointly, or in trusts and companies.  

  • For land held individually, is it held in joint tenants or tenants in common? This can make a huge difference to your estate planning. 
  • For land held within family trusts, go through the above points for each landholding trust.  
  • For land held within companies, who are the shareholders? 
  • Do you have upcoming land transfers? Make sure your structure is setup so that you can potentially access capital gains tax and transfer duty concessions and exemptions. 

In summary, sit down with your advisers, review your structure, and make sure its setup well and that you understand it. Get a diagram drawn up, laminate it and stick it on the office wall! If you would like Byfields to review your structure, feel free to contact us. 

Disclaimer: This content provides general information only, current at the time of production. Any advice in it has been prepared without taking into account your personal circumstances. You should seek professional advice.

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