Capital Gains Tax and succession

A well-orchestrated succession planning process

Business viability, alignment and a sense of family equity must be able to be achieved

The focus of a well-orchestrated succession planning process must be around discovering and addressing the wants of individuals in a manner that ensures ongoing business viability along with the achievement of alignment and a sense of family equity.

But there is no doubt that together with forward-looking, financial management in building a robust balance sheet, farming families can enhance the fortunes of intergenerational succession through ensuring that advantage is gained from the availability of numerous regulatory impost reliefs. Small Business CGT Concessions, Intergenerational Transfer Duty Exemptions, and special eligibility rules for access to the concessional investment environment of superannuation each present significant opportunities that cannot be overlooked or be allowed to pass by through a lack of consideration or timely action.

“When it comes to developing effective succession strategies and the rubber hitting the road, turning those wheels can be significantly enhanced by the offerings of capital gains tax (CGT) and transfer duty (Stamp Duty) concessions, as well as superannuation opportunities being incorporated into the overall plan”

Capital Gains Tax (CGT)

Australian located property, or an interest therein, acquired after 1985 is subject to CGT upon a change in ownership, regardless of the recipient or the consideration paid. The only exception being changes in ownership, resulting from an individual’s death and the distribution of asset from their estate.

Effective farm succession, by nature, necessitates the transfer of real property to the next generation and the impost of CGT can often be viewed as a deterrent for effecting such transfers during one’s lifetime. In the case of death, though, it needs to be recognised that potential CGT liabilities never really go away, but they are simply inherited by your nominated beneficiaries, just as the property asset is inherited, to rise again to the surface at such time when that particular asset is sold.

The availability of what are collectively known as Small Business CGT Concessions, though, can change the inevitability that this impost of Capital Gains Tax will be borne by succeeding generations. Negotiating a complex web of eligibility tests, including maximum net assets of $6 million or business turnover less than $2 million, can often deliver favourable outcomes for farming families, particularly those that allow themselves ample time to consider the succession pathway.

“By actually taking advantage of these concessions during your lifetime, you can deal with those underlying CGT liabilities by way of exemption, so they do not carry forward to the next generation.”

If you miss the opportunity, then it’s a burden you leave unaddressed.

By proactively planning for the handover of your farm business and related assets, contemplating the future needs of family group members, borrowings and appropriate entities, be prepared for the unexpected when it happens and gain certainty for the next generation wanting to take over the family business. Wayne Turner understands the difficulty in starting those conversations and can have you and your family turn those into a positive and constructive succession planning process. Call Wayne on 07 4669 9800.