What you should be reviewing before 30 June

June 8, 2023

With 30 June almost here and the 2023 financial year drawing to a close, what better time to review your business and personal structures, succession and estate planning. This is a good time to reflect on what changes your business has experienced in the last 12 months and think ahead to what the next 12 months might bring.

General review of structure before heading into the next financial year

You may have expanded or scaled back your business, purchased or sold business property, made changes to your premises or lease, or made changes in supply contracts terms. You may have taken on a new direction in your business, such as expanding your online presence.

You may be considering your personal investment strategy for the next 12 months. Before making new investments, you should consider the most appropriate way to structure your investment. For example, if you are considering purchasing an investment property or shares, it may be more tax effective and provide greater protection to that asset to purchase the asset through a trust or private company rather than in your personal name.

Major changes to your business should be properly documented and before making these changes, you should consider whether you still have the right structures in place for operating your business or owning business property?

• Are you planning on expanding your business?
• Are you looking to obtain further finance from your bank?
• Are you considering a new venture with new partners?
• Are you looking to purchase significant business property or planning to sell your business and need assistance to ensure it is ready for sale?

If you’re not sure whether these changes need to be documented, or the best way to do so, please get in touch with us.

Business succession plan

Now is also a good time to review your business succession plan or maybe it is time to start thinking about one! What happens to your business if you or other key persons leave, lose capacity or die? How will your business manage? What will be the cost to your business?  Who can continue to operate your business? Can it continue to operate without you at all? Have you ensured that your nominated business successor has the legal power to step in and run your business if you can’t? These are some important things you need to be considering.

We recommend you review your business succession plan annually to ensure it fits your current circumstances. A properly documented succession plan can make all the difference when a key person leaves, allowing your business to get back on track causing as little disruption to your business as possible.

Discussions with your accountant during your tax planning session

Loans from private companies

The ATO continues to monitor loans or advances made or credits given by private companies to their shareholders (or associates of those shareholders). This can also include:

• transfers of property or other assets from the private company to the shareholder or their associate, where the purchase price is less than the market value of the property or asset;
• loans by the company to the shareholder or their associate that have not been repaid by the date the company is required to lodge its tax return for the financial year in which the loan was made; or
• debts owing by the shareholder or their associate to the company, which the company then forgives (i.e. does not seek repayment).

To avoid these loans, advances or credits being treated as taxable dividends to the shareholders, the company and the shareholder must enter into a written loan agreement before the date the company is required to lodge its tax return for the financial year in which the loan was made.

These loan agreements have mandatory requirements in relation to the maximum term, amount of repayments and the value of security, so care needs to be taken when drafting them.

Farm Management Deposits

Farm management deposit accounts, or FMDs as they are commonly known, can be an effective tax tool available to farmers and graziers for averaging their income over the good and bad years.

Other farmers and graziers may be considering their retirement strategy in the coming financial year. Don’t forget that if you cease being a primary producer, your FMD must be withdrawn within 120 days and is then taxable. This needs to be considered when planning your retirement.

If you have an FMD or are considering depositing funds to an FMD, it is very important that you consult an experienced estate planning lawyer to ensure the FMD is appropriately dealt with in your estate plan.

For more information: I didn’t get the cash but I got the tax bill – careful estate planning needed for FMDs

The end of the financial year is an ideal time to review your current business and investment structures and speak with your advisors about your plans for the new financial year. Ensuring that you are including your accounting, financial and legal advisors in these discussions is a great way to ensure that you’re setting yourself up for success.

Contact a member of the Agribusiness team to assist you in your planning for the new financial year.