By RICHARD MACKENZIE
Apart from my involvement as a senior partner of the commercial and business law practice at Eales & Mackenzie, I have farming interests both here in southern Victoria and in northern New South Wales.
On 18 July 2016, we had our annual bull sale at Llangothlin, NSW, which consisted of the sale of Angus and Hereford bulls.
One of the cattle industry’s most recognised commercial stud breeders at the sale said to me, “Dick, I wish I’d listened to you 20 years ago concerning our succession planning. If we’d followed your advice, we would’ve saved approximately $180,000 in tax the previous year and $360,000 this year just concluded.”
I thought I should give you an outline of what succession planning should be for businesses, especially small family businesses in not only the rural industry but all industries.
Succession planning should be undertaken with the advice of your business lawyer and your accountant.
What is needed for succession and estate planning? Why would you do it?
If you do own a business and you would like to see that continue within the family or sell the business, a plan ought to be put in place about that.
The issues that would be considered would be:
- Review of your businesses by liaising with your legal and financial advisers regarding all your assets and the options available
- Review your financial information and family background and setting out your options
- Considering the transfer of management and control, taking into account taxation, retirement planning and pension issues
- Preparing a strategy to secure the older and younger generations’ future
- Considering the replacement of foregone income for the older generation
- Considering granny flat options so that the older generation can transfer property interests but remain on the property
- Considering a business restructure and potential employees to take over
- Transfer of assets and managing the various consequent taxation implications, including capital gains tax
- Considering mortgages and finance regarding your reorganisation
- Considering issues of death, divorce and property settlements, amongst other important issues
- Restructuring your wills and obtaining advice relating to making a will
As you can see, there is a considerable amount of issues to take in account in succession planning. This is not going to happen overnight, so if you are thinking that something ought to be put in place, then the earlier you get to those initial meetings the better.
The other issue, and this is really where your starting point is, is for each individual involved in a potential succession plan to put in writing what their desires and expectations are, and those should be done individually, free of consultation or interference from other family members.
When those are all put together, it is often a very interesting result and divergence of opinions because it is not worth pursuing these succession plans without everyone coming on board and creating an environment that is going to be acceptable to all parties. That will often involve some form of compromise from everyone.
Do not leave succession planning so late that it is only on your deathbed that you become committed to doing something as that then is just far too late.
We are estate and succession planning lawyers so feel free to contact me at Eales & Mackenzie in relation to these succession and estate planning issues.
Dick Mackenzie