Step 16 – Tax Planning


Step 16 – Tax Planning

By , October 20, 2023

As a business owner preparing to reap the rewards of your hard work and dedication through an exit, the financial landscape can get intricate, especially when it comes to taxes. In this article, we dive deep into the often underestimated but critical aspect of tax planning during the sale of your business.

In numerous jurisdictions, including the majority of countries, selling your business triggers tax implications. These implications may take various forms, such as capital gains tax or income tax, and may vary based on the nature of your sale. However, with meticulous tax planning, you can proactively manage and reduce these tax burdens, staying well within the boundaries of legality and ethical business conduct.

Leveraging Tax Concessions: Insights from Different Regions

Various countries provide specific tax concessions, each tailored to encourage business owners to develop, sell, and fund their retirements. One such example is the small business capital gains tax concessions offered in Australia. These concessions play a pivotal role in minimizing the tax payable upon the sale of a business. To capitalize on these benefits, advanced planning is not just advisable – it’s crucial.

Early Birds Get the Tax Benefits

Initiating tax planning well in advance of your planned sale is a strategic decision. Waiting until the eleventh hour might limit your ability to implement effective tax-saving strategies, potentially resulting in higher tax liabilities. Tax planning involves a thorough understanding of the assets being sold, those being retained, and the implications this has on taxation.

A fundamental step is recognizing which assets will be sold and which will be retained, such as business premises or select investments. This choice significantly influences the tax ramifications of your exit. Seeking guidance from tax professionals to comprehend the potential tax costs and how you can minimize them is of paramount importance.

Seeking Wise Counsel: Tax Experts as Your Partners

Engaging experienced tax professionals, be they accountants, tax lawyers, or certified public accountants (CPAs), is a wise move. Their expertise can guide you on structuring the sale, determining the assets to retain, and qualifying for tax concessions. Tax planning should be integrated into your larger exit strategy, seamlessly intertwining with components like business valuation and value optimization.

Aligning with Your Vision: A Comprehensive Approach

Lastly, while considering tax implications, align this with your overarching exit strategy and financial goals. Factor in not only the sale price but also the net proceeds after tax. Modify your plans accordingly to ensure that your exit aligns with your financial objectives.

In summary, understanding and planning for tax implications during the sale of your business is a critical element of exiting successfully. Don’t procrastinate – initiate tax planning early, seek professional advice, and strategically navigate the tax landscape. By doing so, you can make the most of your hard-earned business value when the time comes to transition to new endeavors.

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Craig West

Craig West

Executive Chairman | Succession Plus

Craig West is a strategic accountant with over 20 years of experience advising business owners. His background as a CPA in public practice has provided invaluable experience in the key issues of concern to business owners.

In March 2014, Craig was appointed Executive Chairman of the SME Association of Australia, Australia’s largest small business organisation representing over 300,000 business owners.

In October 2014, he was awarded the Exit Planner of the Year at the Exit Planning Institute Annual Conference in Texas, USA, due to his innovative development of an exit planning process to help business owners maximise business value and achieve a successful exit.

Craig’s proprietary structure - a Peak Performance Trust - has won the Australia-wide award for the Employee Share Ownership Plan of the year twice in four years.

In November 2018, Craig launched SME Experts in partnership with Mark Bouris’ Mentored on Podcast One and quickly grew the monthly podcast audience to over 26,500 downloads; in October 2019, he released a new podcast focused on medium-sized businesses - Mid-Market Matters.

In July 2021, Craig joined the NSW Committee for STEP (Society of Trust & Estate Practitioners) – focusing on advising families across generations.

Craig has also launched a SaaS platform, Capitaliz (which captures the 21-step process), to assist other advisers internationally deliver advisory services at scale.

In November 2021, Craig was appointed Executive Chairman of NSW Leaders, a business mentoring group for leading NSW businesses.

In July 2022, Craig West received the award of Doctor of Business Administration for his research thesis titled “Examination of the key factors driving business exit options in Australian Small and Medium Enterprises.”

Craig is passionate about encouraging business owners to think strategically, maximise the value of their business and achieve a successful exit.

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