Wikipedia describes ‘okay boomer’ as a catchphrase used to dismiss or mock attitudes typically associated with baby boomers – people born in the two decades following World War II. It’s generally not used as a term of endearment.
In response, boomers came up with a retaliatory ‘okay zoomer’ aimed at Gen Z and mocking their infatuation with and overuse of technology. Nice try, but it’s a little short on impact.
It seems now that the Australian Taxation Office have joined the attack (on boomers, not zoomers) with ATO Private Wealth Deputy Commissioner Louise Clarke recently declaring “Succession planning, and the risks associated with it, is our number one focus in 2025”.
According to Louise, the ATO is paying close attention to how money flows through entities controlled by an ageing demographic. She believes this has led to “plenty of planning, structuring and disposal activity in the market with mature family-controlled businesses being sold or passed onto the next generation” (the heirloomers?).
Put more simply, Louise’s message to post-war taxpayers hoping to pass on business assets is “watch out boomer”.
It’s okay to structure assets however you like provided there is a good reason to do so – like for asset protection. But what you can’t do is structure assets where the primary reason is to reduce tax.
Where this occurs, the ATO relies on a provision of our tax act known as Part IVA. In simple terms it’s a catch-all provision to ensure arrangements that have been contrived to obtain tax benefits will fail.
Of particular concern (to Louise) are Division 7A loans, moving assets between entities, changing ownership and amending trust deeds.
Div 7A is a complex area of law that applies to companies. In its simplest form, it demands that an amount taken from a company by its owner is treated as a taxable dividend, but it is way more complicated than that. It also relates to loans made to shareholders, forgiven debts, and it extends widely across related party transactions.
Moving assets around and changing the ownership of entities are both quite okay, provided they are done at market value, and again, not with the primary intention of reducing tax.
Restructuring sometimes necessitates a change to a trust deed, perhaps changing the trustee, or adding or removing a beneficiary. Caution is needed here as certain trust deed changes can trigger what’s known as a resettlement of the trust which can have dire capital gains tax consequences.
Whether you’re a boomer, a zoomer, or a messy roomer (my kids), the message is to get some advice from a competent professional before you even consider restructuring or transferring control of your entities.
by MARK DOUGLAS
FCPA
Managing Partner of Francis A Jones
www.faj.com.au