The Australian Taxation Office (ATO) has highlighted increasing tax risks for privately owned and wealthy groups due to inadequate succession planning. As many business controllers age, succession planning activities are on the rise, but so too are unexpected tax bills resulting from insufficient preparation.
Louise Clark, Deputy Commissioner for Private Wealth at the ATO, emphasises that many private groups are facing significant tax consequences because they have not properly addressed the tax implications of previous decisions. A lack of effective tax governance is often at the heart of these issues.
Succession planning can be complex, and each private group’s situation is unique. Recognising this, the ATO has updated its guidance to help private groups develop sound tax governance frameworks as part of their succession strategies.
Key recommendations include:
- Establishing a clear succession plan tailored to your group’s specific needs
- Regularly reviewing and updating the plan
- Carefully considering all potential tax consequences
- Seeking professional advice from the ATO or qualified tax advisors when necessary
The ATO stresses that while it offers resources and support to assist private groups in managing tax risks, it is vigilant against deliberate tax avoidance. Effective planning is crucial. Without it, succession processes may trigger unintended and costly tax liabilities.
Clark advises that even if business controllers do not plan to retire or reduce their involvement immediately, having a succession plan that prioritises tax considerations is essential to safeguard the group’s future.
Final Thoughts
Succession planning is more than just preparing for a change in leadership, it’s about managing the tax implications that come with transferring control or wealth within privately owned businesses. With the ATO increasing its focus on this area, proactive planning and sound tax governance are more important than ever.
For personalised advice on succession planning and managing your tax risks, contact our team of Accountants. Call us on 07 3367 3155 or email support@walkerhill.com.au.
