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Some might say that the title of this federal government report says it all … ’different and significant’. It’s been a long time coming but we are now seeing due credit given to the importance of the many Australian owned family businesses.
In reflecting on why family businesses are getting more attention it is important to understand what is different about family businesses:
I don’t know about you but these all sound like good things for the Australian economy which should be encouraged.
While only time will tell if these recommendations will provide a lasting impact there are some key take aways from the government response to these recommendations which gives us some insight into future government policy.
1. A commitment to establishing a ’Small business and family enterprise ombudsman’.
2. Small business policy will now sit with Treasury – this is a reflection of the importance of this sector to the broader economy and will mean that a central department will consider the impact of all policies on family businesses. No more will it just be one department making a submission to treasury. This will also provide stakeholders involved with family businesses better input into policy from direct consultations.
3. The need for detailed sector specific information and statistics on family businesses to ensure appropriate policy decisions. There has been some acknowledgement that everyone may be flying blind in this sector – you can’t make good decisions without good information.
From a tax perspective, the top items of interest form the government response are:
1. Family Trusts – Consideration to be given to the data collected on family businesses with respect to any changes to the taxation of trust distributions. This has been something of a focus area for family businesses who will be use to the reminder each 30 June to have their trust distribution minutes prepared and signed off.
2. Shareholder Loans [Division 7A] – Private family structures will now be considered more specifically with regard to the current Division 7A review underway. Similar to trust distributions this is an ongoing issue for family businesses around managing the tax on these obligations and apparent unfairness that the rules can cause.
3. Employee share scheme rules – The government noted changes are already planned for businesses in general where it relates to engaging with and incentivising key members of family businesses. An announcement on these measures is expected by Christmas.
4. Trust Perpetuity – The government will engage with the States regarding the limited life of trusts. South Australia allows a trust a potentially indefinite life span but other states limit it to 80 years. Case in point for this change would be the litigation around the Rinehart extension of vesting date played out in the media.
While it is commendable that the government will at least explore some of these tax issues, only time will tell if family businesses will be afforded the concessions that larger corporates sometimes seem to be able to lobby for.
It is great to see the government give recognition to the unique features of family businesses and the significant impact they have on ensuring a thriving Australian economy.
businessDEPOT is a member of the thriving family business community uniquely placed to offer insights and advice whether it be from startup to growth or succession.
For a full copy of the report or the government response to recommendations please click on the below links: