Succession planning transactions and arrangements
We focus on private groups that incorrectly recognise the tax consequences of transactions or structure to minimise or avoid tax when undertaking succession planning. This can be when you are preparing to sell a business or passing control or wealth to family members.
Situations that attract our attention include:
- entities failing to recognise a capital gains tax (CGT) event happened where they have restructured or transferred an asset
- entities incorrectly applying tax concessions or rollovers
- entities adopting complex structures or entering into an arrangement to access tax concessions or rollovers that are not otherwise available
- entities failing to review the pre-CGT status of assets after an event that affects the beneficial ownership of such assets
- transferring wealth through loans, payments or forgiveness of debt and failing to consider the application of Division 7A
- the use of trusts where
- there are amendments to the trust deed, such as changes to the trustee or appointor, adding or removing beneficiaries and amending the vesting date
- trusts have made family trust elections or interposed entity elections, and are distributing outside the family group
- entities inappropriately using self-managed super funds to access a lower rate of tax.
Tax governance
We have seen evidence of private groups subject to unintended tax consequences because they do not have good tax governance in place. For example, when they:
- do not put a succession plan in place
- do not have documentation to support transactions and arrangements
- fail to lodge returns on time.
To learn how to put a sound tax governance framework in place to help you manage tax issues, refer to our guidance on succession planning in our Tax governance guide for privately owned groups.
More information
Be aware of potential tax risks that may arise from succession planning and what activities attract our attention. For more information, see: