Tag Archive: Accountant

Kirsten Armstrong

Posted on December 16, 2019 by Grace Dawson

Graduate Accountant

 

There was always going to be maths involved in Kirsten’s career, whether as an accountant or maths teacher. But accountancy was always her real goal and wanting the hands on experience of working in a firm while at University, Kirsten discovered the role at BLG. She has now been with us since 2015, making the office an even brighter place and working brilliantly with our clients, all while completing her Chartered Accounting qualification.

Kirsten enjoys building strong relationships with her clients, which also allows her to understand their operations and the outcomes they want to achieve so she can help them grow their business. She goes out of her way to assist and put them at ease, with detailed explanations of what is happening and why, so they have a clear understanding. A talent across all areas of business advisory services, Kirsten most enjoys tax planning where she can provide clients with noticeable value.

Kirsten believes she has the best of both worlds at BLG. A fun and friendly work environment, paired with the challenges her role offers, keeps things interesting on a daily basis. But her time away from the office is spent with her real loves – her fiancé and energetic dog. She loves going for walks, playing a bit of netball, spending time with her family and planning her wedding!

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Estate Planning Step-by-Step – Rest Easy by Protecting Your Assets & Loved Ones

Posted on December 2, 2019
by Luke Bland

4 min 30 sec read

Contents

  • Questions to Ask Yourself in Estate Planning
  • Common Assets involved in Estate Planning
  • Drafting your Will – Who is involved?
  • Who is the Executor?
  • Testamentary Trusts & Asset Protection
  • Where Do You Start?

There are tasks in life that we never really want to undertake but know we need to. Two of these are your Will and Estate Planning, and we all know they really are some of the most important documents you will ever have drawn up.

You work hard throughout your life to buy a house, build a business and maybe even an investment portfolio. The assets that you accumulate mean something to you and the people closest to you. It should be you that decides what happens to these assets.

While most people realise they need to create a Will to distribute their belongings and organise an executor of their Will, they don’t realise how broad and complex estate planning can be. To ensure that your wishes are carried out, and to save your children, grandchildren or other intended recipients a lot of trouble and heartache, thorough estate planning is vitally important.

Questions to Ask Yourself in Estate Planning

  1. Assets – What do you own?
  2. Asset ownership – How are these assets owned? E.g. personally, in a superfund, via a family trust, joint tenants vs tenants in common.
  3. Asset inclusions – Which assets need to be included in your Will and which assets fall outside of your estate/Will?
  4. Asset beneficiaries – Who do you want to leave your assets to?
  5. Asset exclusions – In there anyone (such as an ex-spouse or estranged family member) that you specifically want to exclude?
  6. Unexpected beneficiaries – Have you considered all potential beneficiaries? Failure to do so could lead to your Will being challenged, which can be a costly and traumatic experience for the intended beneficiaries.
  7. Life insurance – Do you have a life insurance policy? Where or who will these proceeds be paid to?
  8. Executor – Who will be the executor (personal representative) of your Will? This can be an individual or multiple people jointly.
  9. Testamentary Trust – Do you want your assets to go directly to your beneficiaries or will you use a Testamentary Trust?
  10. Asset distribution – How can your assets be distributed to the intended beneficiaries in a tax effective manner?

Common Assets involved in Estate Planning

Family Home

If you own your principal residence (home) with your spouse as joint tenants, the title will automatically be transferred to your spouse on your death. If you own your home as tenants in common, your share will form part of your estate, to be dealt with in your Will. If you are the sole owner of your home, it will also form part of your estate.

If your home has never been used for another purpose (as an investment property or business premises) there are no tax implications when the title (ownership) goes to your spouse as joint tenants. If ownership of your home is transferred in accordance with your Will, the new owner(s) have up to 2 years to move in and make it their primary residence, or sell the property, for it to be exempt from capital gains tax (CGT). If they hold onto the property and sell it after more than 2 years, they may be liable for CGT. Their cost base for CGT is regarded as the market value of the property on the date of your passing.

Personal Assets – Cash, term deposits, listed equities, real estate and other investments

These assets will form part of your ‘estate’. In your Will, you can dictate how much should be allocated to each person (beneficiary) and whether specific investments should go to specific beneficiaries. If specific investments are referenced in your Will, it’s important that your Will is updated when these investments are sold or new investments are acquired. It’s common for assets to be allocated on a percentage basis, or to allocate specific amounts to specific beneficiaries.

For assets that have been acquired after September 1985, beneficiaries will inherit these with your original cost base. If any assets were acquired before that date, the cost base for the beneficiary will be the market value on the date you pass away.

Another option is for the estate to sell or realise the investments and instead distribute cash to the beneficiaries. However the estate will need to pay capital gains tax on any capital gains realised, meaning the beneficiaries will receive less value when the proceeds are distributed.

Family Trust Assets – Cash, term deposits, listed equities, real estate and other investments

If you have built up an asset portfolio within a Family Trust, you need to think about what you want to happen to this trust and these assets. The underlying assets will not form part of your estate, but the trust will usually have a trustee company. Your shares in the trustee company will form part of your estate.

You can leave these shares to one or more beneficiaries in your Will. The new shareholders will generally have the combined power to appoint/remove directors. This effectively gives them control of the trustee company and therefore control over the trust’s assets.

You also need to consider who the appointor of the trust is, as they have the power to remove the trustee and appoint a new trustee i.e. ultimate control of the trust. Your trust deed will contain provisions on how to change an appointor.

The trust may continue to operate, and the income and assets of the trust will be able to be distributed to the beneficiaries of the trust, in accordance with the trust deed. There generally won’t be any tax implications upon the shareholders of a trustee company changing.

Private Companies

If you own shares in a Private Company, whether it is carrying on a business, an investment company, or a dormant company, your shares will form part of your estate. Your Will should determine what you want to happen to these shares. The shares may represent a controlling interest in the company, allowing the new shareholder(s) to ultimately control to operations of the company.

The CGT implications and cost base provisions when transferring shares to beneficiaries in accordance with a Will are the same as if transferring listed shares (see Personal Assets above). However in some circumstances small business CGT concessions may be available to reduce the taxable capital gain to nil when the beneficiary or legal personal representative sells the shares. This can happen when the deceased would have been able to access the small business CGT concessions just prior to their death, and the shares are sold within 2 years of the date of their passing. These concessions also apply to other small business assets, not just shares.

Life Insurance

If you hold a life insurance policy, the proceeds will be paid out to the nominated beneficiary. This may be an individual, or your estate. If it’s paid to your estate, it should be considered in your Will. If it’s paid to an individual directly, you should consider the life insurance payment that this beneficiary will receive when you are deciding where to allocate your other assets.

Superannuation

Any superannuation interests you hold will be dealt with outside of your Will. The treatment of your superannuation upon your death will be determined by a combination of your superfund’s trust deed, any reversionary pension nominations you have made, and any binding or non-binding death benefit nominations you have made.

The rules regarding payment of superannuation death benefits are complex, but the key points are:

  • Any superannuation interests in pension phase can revert to another member of the fund (e.g. your spouse), thus remaining in the superannuation system. This is known as a reversionary pension. The recipient must be aware of their transfer balance cap, and may have to roll back some of their existing pension account to their accumulation account.
  • Superannuation interests in accumulation phase will be paid in accordance with a valid binding death benefit nomination (BDBN) if one exists. A BDBN can instruct the trustee to pay the amount to a specific beneficiary, or to your legal personal representative, where it will form part of your estate and be dealt with by your Will.
  • If no valid reversionary pension nomination or BDBN is in place, it is up to the trustee to determine to whom your superannuation death benefit is paid. In a self-managed superannuation fund (SMSF), the trustees (or trustee directors) will usually be the remaining member(s), or your executor if there is no remaining member. In complex family situations, such as your spouse having children from a previous relationship, your spouse could potentially transfer your super to those children, leaving your own children or relatives with nothing.
  • If paid out as a superannuation death benefit, to an individual directly or via your estate, in accordance with a BDBN or otherwise, there can be income tax implications. If paid to a death benefit dependent, the amount is tax free. There are a number of criteria that must be met for someone to be considered a death benefit dependent. Spouses and children under 18 will usually meet these criteria. Adult children often will not meet the relevant criteria, and could lose up to 17% of their payment in tax. In some circumstances, such as the diagnosis of a terminal medical condition, it may be worth considering withdrawing some or all of your superannuation as a lump sum payment, and gifting this to your adult children. This will fall outside of the superannuation death benefit rules.

Drafting your Will – Who is involved?

Any assets that pass to your estate on death will be distributed in accordance with your Will. It is therefore very important that your Will is drafted in a way that is clear and follows your wishes.

It’s wise to engage a lawyer that specialises in Estate Planning to draft your Will. You may want your accountant or business adviser to be present at any meetings with your estate planning lawyer, to ensure your lawyer understands your business and asset holding structures, and can provide for these appropriately within your Will.

Remember that a Will can be challenged. You need to consider anyone that could make a claim on your estate, such as someone who you have provided financial assistance to, or had a close personal relationship with in the past. If you don’t want to leave anything to a person that may expect something, or for your proposed distribution of assets to be viewed as ‘unfair’, you will need to document and justify why you want your assets to be allocated that way.

Who is the Executor?

Your executor will be responsible for administering your Will and distributing your assets in accordance with your Will. Your executor is also responsible for paying any tax liabilities from your estate. They generally have the power to appoint a new director to any companies where you held the sole directorship.

Given the importance of their role and the power they hold, your executor should be a trusted person, such as a relative, adviser or lawyer. You can also nominate a number of people to act jointly as executors.

Testamentary Trusts & Asset Protection

You can choose to set up one or more testamentary trusts in your Will. This means that instead of assets passing directly to a beneficiary, the assets are passed to the testamentary trust and controlled by the chosen trustee – usually a family member, accountant, adviser, solicitor or a combination – on behalf of the beneficiaries of the testamentary trust.

A testamentary trust allows a beneficiary to receive the income and benefits of an asset or group of assets, without having control of these assets. This is particularly useful in situations where you have an adult child that may not be financially savvy, or may be going through bankruptcy or a relationship breakdown, where introducing additional assets may leave these assets exposed to creditors or a recent ex-spouse.

You can also dictate who the beneficiaries are of a testamentary trust. For example, you may specify that all income is to be distributed to your grandchildren rather than your children.

As well as asset protection, testamentary trusts can provide tax advantages. The trustee will usually have discretion to distribute the income of the trust to various beneficiaries. This enables the trustee to take advantage of lower marginal rates of tax of one or more potential beneficiaries. It should also be noted that, unlike a standard discretionary or family trust, income from a testamentary trust that is distributed to minors is taxed at adult rates, including the full tax free threshold.

Where Do You Start?

Estate planning is complex and your needs are ultimately determined by your assets, your family situation, and your interests in any trusts, companies and super funds. In addition to the general rules outlined above, your trust deeds and company constitutions may contain special rules.

To get your estate planning organised, the important next step is sitting down with your lawyer and adviser to map out your assets and your structures, how you picture everything being allocated and who you want to have control over various areas.

If you don’t have a trusted lawyer or adviser, please speak to our team of business advisers who can take you through the process and put you in touch with an estate planning lawyer. We would accompany you to meetings with your lawyer to put in place the required documentation that ensures your assets are distributed according to your wishes with minimal risk of disputes.

While thinking about our death or what happens after is never pleasant, it’s worth planning for so the people you care about are safeguarded. Therefore if you have significant assets and don’t have an estate plan in place, we recommend organising one as soon as you can.

Wishing you every success!

 

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Succession Planning – How to Prepare and Protect Your Business and People

Posted on December 2, 2019
by Cem Ozer

All businesses have lifecycles. From humble beginnings, where your once peaceful evenings capitulate into countless sleepless nights, contemplating how you are going to pay your staff. To the satisfaction of achieving your business goals and helping your employees grow professionally and personally. To the inevitability that one day, your journey within the business will come to an end.

It can be a daunting task to think of the potential hurdles your business may come across in the future, along with what will happen when you are no longer running the business. It is only natural that you want your business to have a life after you. Whether you dream about handing over the reins to your children, consider it a great personal achievement to pass it over to an employee who has been with you since day one, or even if you sell your business to a third party during it’s prime, putting a succession plan in place now safeguards everyone involved in the business, including if the unexpected occurs.

What is Succession Planning?

Succession planning means setting up your business for the future, with strategies in place for when you exit the business.

From an organizational level, this can include developing the skills of the people in your business to more than just the bread and butter of their daily work. This can mitigate the gap in knowledge within a senior role in the unfortunate event a position is vacated unexpectedly. On a larger scale however it develops individuals who can take over at the point that you exit the business.

From a personal perspective, it involves having the necessary foundations, policies and structures in place, to allow for a smooth transition when you exit the business.

Key Components of a Succession Plan

For a business owner, succession planning can vary greatly depending on your individual circumstances. However, there are a few key components that are common and essential for it to be successful:

  1. Start Planning Ahead of Time

It’s important to note that succession planning should not begin at the point you decide to move on from your business. The issues around business succession planning are varied and complex. As such, the earlier this is considered, the greater emphasis you can put on ensuring that the plan suits your intentions and any issues can be resolved.

  1. Structure Your Business for Your Future

One of the key benefits of planning ahead, is being able to review the way your business is structured. This plays an important role in both your personal and business’s future. Business structures are not only important for managing your tax requirements, but your personal assets also need to be taken into consideration.

It’s not uncommon for a business structure to be overlooked, especially upon its establishment. As part of BLG’s review process for new clients, we’ll often find their business structures are not set up in a way that provides the best outcome for their individual needs. Identifying ineffective structures early on can prevent avoidable consequences in the future.

  1. Prepare Your Business for Life Without You

The years leading up to your exit are often crucial. Therefore, deciding what the plans are for your business when you do leave can make this period easier to manage. If you are passing your business onto family or an employee, it’s important those next in line have the complete range of skills and knowledge to keep the business running effectively, and for the transition to be as smooth as possible. Furthermore, if you plan on selling your business, it’s ideal to show a strong financial position for potential external purchasers to maximize your proceeds.

  1. Be Aware of the Tax Implications

For many business owners, the sale or transition of their business will represent the most significant part of their retirement funding. Maximising your after tax proceeds will be a key goal, so it’s critical to get advice on your exit strategy, the tax implications themselves and how to best structure your retirement assets to minimise your tax liabilities.

  1. Safeguard Your Assets

In the unfortunate event that you exit the business because you have passed away, it’s important to form a plan for what happens to your personal assets alongside your business succession plan. This is known as Estate Planning, and is usually established via a Will. It is always beneficial to consult a specialized Estate Planning lawyer to assist in preparing a Will for this purpose, and BLG can put you in touch with our network of professionals if required.

How to Get Started on Your Plan

Succession planning shouldn’t be a reactionary tool. It should be considered through all the phases of your business lifecycle, and requires you to be proactive in your planning.

Do you intend to hand the reins over to the next generation, to someone from within the business, or sell to a third party? To get you started with succession planning here are some of the questions to ask yourself:

  • Who will run the business when you are no longer there?
  • Does the next generation share your passion for the business? Do they have the skills to run the business?
  • How can you maximise the ‘value’ of the business ready for sale?
  • What are the tax and legal implications of selling?
  • What will happen to the business upon an unexpected exit?

Establishing your succession plan can be a daunting task. The amount of information that needs to be considered can be quite overwhelming. As such, we recommend you speak to a trusted accountant or business adviser to guide you through this process. If you don’t have an adviser to help, you may decide our team at BLG can be of significant value to you. Have a talk with our team so you can find out if our approach suits your needs.

Wishing you and your business every success!

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Tax Planning – Strategies & Opportunities for Business Owners

Posted on November 12, 2019
by Tim O’Brien

4 min 30 sec read

Contents

  • Taking Time for Your Bottom Line – Why Tax Planning is Important
  • What does Tax Planning involve?
  • How to get Started – Questions to Ask Yourself
  • Questions to Ask Your Accountant or Business Adviser
  • When Should You See Your Accountant or Business Adviser?
  • Little Effort, Big Gain – Next Steps

As a business owner you probably have some goals you want to reach for your business. Do you know what strategies to put in place to get there or have a trusted adviser guiding you?

One strategy that all businesses should have set up is tax planning. As a business owner tax planning can be an exciting process – as it’s a real opportunity to stop, reflect and take charge of your business by planning ahead and focusing on the numbers of the future rather than of the past.

Achieving your business goals is much simpler with tax planning, but it’s equally important even if you don’t have goals and just want to make sure the business is running smoothly. It’s not until someone delves into the business that you realise there are improvements you can make.

Unfortunately, not all accountants offer tax planning or business advice, so if you work with an accountant it’s worth asking them about it. If they do then it’s a great opportunity for you to move forward, but if they don’t then we suggest seeing a business adviser to guide you through the process.

Taking Time for Your Bottom Line – Why Tax Planning is Important

Why does our team at BLG believe tax planning is one of the most important annual events for all our clients?

For business owners, it’s a great opportunity to down tools for 5 minutes and take stock of where they are at. It’s also as good a time as any to take a moment to be proud of what you have achieved, critical of what you haven’t, and envisage where you want your business to be in 3 months-time, in a years-time, in 5 years-time depending on your goals.

As business advisers, tax planning is an opportunity for us to help business owners be proactive with their business, provide valuable input around their projected earnings and tax position and show you how the business is performing as opposed to how you think it’s performing. This planning is extremely important for the long term success of any business.

Make tax planning that one time of the year where you actually do set aside a day to step back from your otherwise hectic schedule to assess the health of your business (and yourself for that matter). There’s a good chance your customers, employees, family and friends, and business bottom line will thank you for it!

What does Tax Planning involve?

In more detail, tax planning means reviewing your current business, asset, and liability position before the end of the financial year, and will give you an understanding of where the money you are making is going. It also involves identifying any opportunities or areas of concern in your business so you can make financial decisions in the short to medium-term that are well-informed. Through tax planning, business owners have the option to implement strategies before 30 June that manage your tax position.

How to get Started – Questions to Ask Yourself

If you are unsure about seeing an accountant or business adviser it’s a great idea for you, as the business owner, to review your business by asking some key questions. Answering these questions will help create a picture of how your business is tracking:

  • Are your sales in line with your expectations? If not are there opportunities to reach out to new customer bases? Are less profitable customers impeding your ability to service your better ones?
  • Do you have issues with collection of debtors? If not do you need to address your payment terms? Are you chasing your debtors promptly and regularly?
  • Are you incurring unnecessary expenses? Are you getting an adequate return on any advertising spend?
  • Are there expansion opportunities within your current business? If so what do you need to put in place to explore these?
  • Are your investments providing the returns you were hoping for?
  • How does this year’s performance compare to last year?
  • Are there any opportunities you should be taking advantage of?
  • Have you provided for any potential tax liability?
  • Are there any strategies you should be implementing prior to 30 June to manage your tax liability?

Once you’ve answered these questions it is our hope that you will feel comfortable with your business position and ready to forge ahead. Or maybe the results were not crash hot like you were expecting and you need some direction. Whatever your review turned up, setting up tax planning is the recommended next step.

Whether you decide to see an accountant or business adviser following your business review, just make sure they offer ‘Tax Planning’, not just Tax Advice, as they require different approaches. We give you a hand with this below.

Questions to Ask Your Accountant or Business Adviser

So what about us? What should accountants or business advisers be able to offer to create an effective tax planning strategy for your business?

To determine whether the accountant or business adviser you are meeting with can help you in the right way, you should really only need to ask two questions to receive the necessary feedback. But make sure that any advice they do offer is tailored for your business. Following are the questions and the types of responses you should be getting back.

  1. How does your tax planning process work?

The accountant or business adviser should offer the following:

  • A review of your year-to-date performance in comparison to previous financial years
  • Feedback on your business performance compared to industry standards
  • Commentary on any trends or areas of concern in your year-to-date figures
  • A review of your financial structuring
  • Business profit and income tax projections which in turn assist in all important cash-flow planning
  • A projection of your year end results based on our knowledge of your business
  • The ability to implement any changes that need to be made before the end of the financial year
  1. What are some of the tax planning strategies you suggest?

On the back of the above business analysis they should then suggest some strategies to help manage your tax liabilities and strengthen your balance sheet. Some of these include:

  • Taking advantage of any government incentives like the $30,000 instant asset write-off
  • Reviewing the remuneration packages of related employees
  • Maximising your superannuation contributions following past reforms, and detail any impact the reforms may have on you and your family group
  • Advising the minimum pensions to be paid from your superfund for the fund to maintain its tax exempt status
  • Assessing the viability of any salary-sacrifice options
  • Reviewing your current business structure
  • Review of the groups assets and liabilities
  • Ensuring compliance with Division 7A in relation to Director’s loan accounts and unpaid present entitlements (unpaid trust distributions)
  • Reviewing your ledger for potential unrecoverable debts or obsolete items of stock or equipment to be written off
  • Reviewing your Estate Planning and Succession Planning
  • Managing and advising you of your estimated tax position

At the end of a tax planning process with your accountant, you should expect to walk away with more insight into your own business, a greater level of surety to make short to medium-term financial decisions, and therefore be in a better position to take advantage of any opportunities available to you.

If you are ready for the next step to make sure your business future is strong and secure, feel free to take our team through the tax planning hoops and get the answers you deserve here.

When Should You See Your Accountant or Business Adviser?

When it comes to tax planning there are specific items that need to be performed ahead of the end of financial year. So it’s important to decide on an accountant or business adviser you are happy with now and meet with them in the last quarter of the financial year to ensure your strategies are set up in the right way.

Making sure you have covered all your bases ahead of financial year end will put you in good stead and may save you thousands or even tens of thousands off your tax bill. Like many other aspects of your financial life, through knowledge and understanding comes clarity and improvement.

Little Effort, Big Gain – Next Steps

No matter how big or small your business is, tax planning is worth considering.

Remember, it’s not just about tax, it’s about gaining a better understanding of your business as a whole and putting goals in motion. With the right advice you can achieve more than what you expect.

Although the process may involve an extra trip to the accountant, I believe it is an area of our work where we provide further value for money.

Your business is your livelihood so make sure you meet with a trusted accountant or business adviser for your tax planning.

If you are investigating a number of business advisers before making your decision, our team at BLG are available to delve into your business and show you a clear direction. There is no cost involved in an initial discussion with us about your business, and if you feel we aren’t the right fit for you then there’s no obligation to work with us, so why wait? We encourage you to get in touch today and get things moving!

Keep in mind your tax planning will need to be done prior to 30 June, ideally early in the last quarter of the financial year, so that any necessary action can be taken before year end.

Wishing you every success!

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