Succession planning can involve a number of considerations, and, at times, it can seem like a complicated process. However, private groups need to prioritise it, as, succession without planning may lead to unintended tax consequences. The ATO’s refreshed guidance will help you meet your tax obligations. 

Louise Clarke, Deputy Commissioner for Private Wealth Client Experience, advises: 

‘Considering the tax consequences of succession planning should be a priority for private groups, particularly where they’re preparing to sell a family-controlled business or planning to transfer control or wealth to the next generation. Even when a controlling individual isn’t looking to retire or step back from the day-to-day operations of the business in the immediate future, they should have a plan in place for their succession, and the tax implications should be front and centre.’

We know that every private group is different, and each succession plan will be unique. That’s why our refreshed information provides guidance for all private groups. A key aspect is making sure you have sound tax governance.

As Louise emphasises: ‘Having a sound tax governance framework in place will make it easier for you to manage tax issues associated with succession planning and reduce unintended tax consequences. You should also consider the wider tax implications for the next generation.’ 

The ATO’s information lists key things you should do as part of succession planning, including:

• put a succession plan in place
• check it regularly, particularly when circumstances change – you may need to factor in changes to family relationships, unexpected illness or other alterations to business structure or operations 
• consider the tax consequences – you’ll also need to retain documentation to support transactions with a tax effect and obtain a valuation, where required
• seek advice, from us or your tax adviser, as required.

Private groups should also be aware that while the ATO are here to provide helpful information, they’re looking out for deliberate tax avoidance. The ATO’s information also details succession planning tax risks and what attracts their attention.

The ATO will continue to provide information on succession planning and the associated tax risks to help you with the tax management side of your plan.

Source: Australian Taxation Office