Monday, December 11, 2017

Asset Protection and Tax Effective Business Structures

Asset Protection is obviously about protecting your assets. It is a process which involves putting safeguards in place to manage risk, using appropriate insurance where risks cannot be eliminated and structuring your business to protect your assets in a way that is cost effective, tax effective and practical.

It is very common in a financial crisis of some kind for people to want security and certainty. Unfortunately people also tend to forget the worry and the stress of financial crisis, when the economy pulls into recovery mode and the cash starts flowing again. There is no better time than now to put some asset protection policies in place as times are uncertain and you never know what the next cycle will bring. How would you feel if everything you've worked for - for yourself and your family - was lost? How exposed are you to market forces like interest rates, the Australian dollar or rising commodity prices? What would happen if you lost one of your biggest customers? What would happen if you defaulted on your finance arrangements? How would you cope if you or your partner was sick and unable to work? If the answer to any of these questions leaves you feeling uncertain and worried then you may need to look at a plan which encompasses asset protection and risk management. For certain industries in particular such as doctors, solicitors, financial advisors or other professionals then the litigious nature of your industry dictates that you should have risk management strategies in place. Others with a more urgent need for asset protection include those businesses with considerable land holdings, plant and equipment, as well as businesses in a start up or growth phase where risk is high. 

Most business owners unknowingly have their assets exposed and risk losing their wealth because they have not been advised on how to structure their assets and liabilities in the event of misfortune.

At Auswild & Broad, we can help you:

  • maximise the protection of your assets
  • ensure that your assets are owned in the most appropriate structure
  • build a wall between your business and personal assets
  • create separation between the ownership of business assets, and the operation of business activity
  • implement risk management strategies in your business to help reduce your vulnerability to risk

We do recommend that you look into insurance as a balanced approach to risk management. We can explain different types of insurance and work with your financial planner to help you select a product that reflects your needs, however we are not involved in selling insurance, nor can we recommend any specific products.

Leading on from Asset Protection, there are also real cost benefits to be had from ensuring that your business is structured in the most tax effective way. This is not about avoiding tax, but rather making sure that you pay no more tax than you should. It may involve using a combination of companies and trusts, dividing your assets into different segments or switching to a structure that allows for increased ability to allocate income tax effectively e.g. by distributing income to other family members, or by capping tax rate at the 30 cent company rate.

The process of preparing an Asset Protection Strategy at Auswild & Broad involves:

Step 1 – We prepare an Engagement Letter detailing the work to be done with an estimated fee structure. With this letter you will receive some basic information about Asset Protection, along with a set of questionnaires for you and your family to complete.

Step 2 –We meet with you to discuss your needs and complete a fact finding exercise where we compile a Family Tree, a Business Structure Flowchart and a Statement of Financial Position. We also review and discuss the answers to your family questionnaires.

Step 3 – We identify any issues that may arise including review of tax, CGT, asset protection and risk management. In addition we look at the viability of the business, including an industry profile. From here we make a recommendation or identify a series of options for your consideration.

Step 4 – We meet with you again to go over our recommendations and prepare an Action Plan. In most cases we will liase with your solicitor, banker, financial planner and any other advisers to ensure that your plans are compatible across these disciplines.

Step 5 – You receive a complete package containing a summary of your Asset Protection Strategy, detailed notes and tax considerations and notes from advisers along with the Family Tree, Business Structure and Statement of Financial Position prepared earlier.


Auswild & Broad Pty Ltd
ABN: 88 089 746 190
Disclaimer
E. temora@auswildbroad.com.au
P. (02) 6978 0077
 
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