As advisors to medical professionals we regularly discuss structuring of business operations and investments. Although other factors come into play, the main variables here are whether the structures support or hinder asset protection and tax efficiencies. Presently we wonder whether it is also time to add future proofing your affairs to contemplate legislative changes that are yet to be made?
This concept is perhaps to embark on an impossibility. How can we contemplate changes yet to be made, let alone reasonably advise in anticipation of such unknowns?
We humbly submit that the best advisors are always thinking about tomorrow and bringing their thoughts about future opportunities and challenges to bear on present advices.
As an example, there has been much press in recent weeks about the ATO’s new “draconian” rules for family trusts. The rules have seemingly changed overnight with this announcement! Future-thinking advisors have seen the writing on the wall for this element of family trusts for at least a few years now. The latest announcements, whilst remaining disappointing, are not a surprise and have already been contemplated as likely in structuring advices for some years by such advisors.
What other potential changes should your future-thinking advisor be contemplating?
Let us submit two for your consideration.
Domestic transfer pricing
It is not uncommon for profits to be shifted between entities in family groups by way of charges between the entities. These charges are often ostensibly for administration or management. We submit that the days of these charges being able to be used without true, commercial justification are truly numbered, if not already passed. If your medical business group relies on such charges to ensure tax efficiencies, you should be rethinking now.
Estate & gift taxes
Although there can be capital gains tax implications on passing assets as gifts or by will, Australia does not presently have a system of estate and gift taxes per se. Such regimes impose an impost on the mere passing of assets to others as gifts or on death. Such taxes have long been part of the tax regimes of established Western jurisdictions like the USA, UK, France and Germany. The tax rates in these jurisdictions range from 30% to 45%. Like land taxes, estate and gift taxes are wealth-based taxes, as opposed to income taxes we are generally used to in Australia. As wealth discrepancies grow around the world there are increasing conversations about changing the tax mix to incorporate a greater reliance on wealth taxes. Whether or not such taxes ever see the light of day in Australia may presently be a moot point, but in light of the discussions, should your structuring discussions be contemplating their arrival?
Next time you meet with your business advisor, perhaps ask them what future changes they are thinking about which may be of importance to your world today?