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15th National Tax Intensive Retreat: Growing Pains - Expanding Family Businesses

Published on 22 Nov 2007 | Took place at Sheraton Noosa Resort and Spa, Noosa, QLD

This conference was held on 23 - 25 August and again on 22-24 November 2007. "Growing Pains - Expanding Family Businesses" is the theme of this year's National Tax Intensive Retreat. It is about taking a successful small business and growing it to a very successful large business with a particular emphasis on tax.

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Individual sessions

The endgame - extracting value - the tax issues

Author(s):  Peter J MCKNOULTY The variety of corporate capital management strategies available to the expanding business continues to grow and the means by which enterprise value can be released have become increasingly sophisticated (as evidenced by the burgeoning number of ATOIDs on the subject). The High Court's decision in McNeil focused on one such approach only. This paper is about the taxation issues which arise when shareholder value is released; whether that be by a trade sale, listing or a continuing participation and includes a consideration of:

  • Share sales (allocation of the purchase price and valuaton issues)
  • Restraint of trade and exit payment
  • Dividends, capital reductions and buy-backs
  • Whare is learnt from Lend Lease?
  • Earn outs and CGT issues
  • Future take out - options issued at a discount
  • What is learnt from McNeil through examining various forms of "equity" returns (eg rights, options)?
Materials from this session:

Financing the growing business - the taxation issues

Author(s):  Geoffrey DUNN

Growing businesses are faced with a multitude of ways of funding expansion. Often the taxation implications will determine which funding structure is to preferred. The matters covered in this paper include:

  • Interest deductibility - when is interest not interest
  • Tax timing advantages (sections 8-1,  25-85 and 82KK)
  • The debt/equity rules and their impact on deductibility of funding costs
  • Capital injections and value shifting
  • Financing distributions to owners 
Materials from this session:

Capital raising for the growing business

Author(s):  Jenny HUTSON

Funding the business is essential to growth. The more rapid the growth the greater demand for capital. The funding sources of capital are endless but the downside is it's cost or loss of control or ownership. This session is about identifying the different sources of capital and their advantages for the growing business. Topics covered in this paper include:

  • Bank loans
  • Private equity investment (mezzanine debt)
  • Venture capital
  • Government grants and subsidies
  • Factoring
  • Stock exchange listing
Materials from this session:

Goodwill and taxation issues

Author(s):  Michael WALPOLE

Goodwill is the asset used in business each and everyday and which the expanding enterprise ultimately expects to cash out at a premium (whether by a trade sale, float or management buyout). Tax reduces the value available to the business owners and must be understood and controlled. Confusion often exists between value attributable to goodwill and other assets (generally IP). This paper will deal with:

  • Identifying goodwill - what is it legally?
  • The source of goodwill in intangible assets such as licences, trademark and designs
  • Goodwill - CGT and Division 40
  • The fiction and consequences of goodwill licensing )Just Jeans issues)
  • Franchisee's goodwill and what happens when the franchise ends?
  • Goodwill - know-how and show-how; the differences and CGT consequences 
Materials from this session:

Intellectual property and taxation

Author(s):  Teresa DYSON

Intellectual property is the life blood of a modern growing enterprise. Think of the business names, logos, trademarks and designs which are avidly protected by international corporations because they are the back bone of the their enterprise value. This paper identifies the essence of IP and the taxation consequences which follow when dealing with IP in business structuring and transaction. In particular:

  • Structures for holding IP
  • Interplay with R&D concessions
  • Termination value - balancing adjustments and CGT events A1 and D1 when IP is transferred
  • Creation of IP outside of Australia (original copyright)
  • Draft TR 2007/D5 on royalty withholding tax and assignment of copyright 
Materials from this session:

Rewarding and retaining key personnel of the growing business

Author(s):  Peter GODBER

Key employees are vital to the continuing growth of the business. They will be retained and innovate if rewarded appropriately. This paper is about the important issue of employee remuneration and its tax consequences for both employer and employee. This issues which will be considered include:

  • Providing equity in the business while retaining family control
  • The interaction between Division 13A and executive share and option plans
  • Alternative remuneration strtegies eg. phantom share schemes
  • Sign on incentives and other bonus arrangements
  • Funding of employee incentives
  • Thinking ahead - impact on the structure and exit/succession planning 
Materials from this session:

Structuring and restructuring the growing business

Author(s):  Greg TRAVERS

Note: This paper was originally presented at the 15th National Tax Intensive in August and November 2007. This updated version was presented at the NSW event Annual Tax Forum in May 2008.

Microbusinesses will grow into small businesses which in turn expand into large businesses and, with a touch of luck and good management, will become very large businesses. This paper focuses on topics such as:

  • Restructuring to better suit the owners' changing circumstances
  • The income tax and GST implications of restructuring
  • Creating better structures using CGT rollovers, exemptions and demergers
  • Stampy duty - the great impediment.
Materials from this session: