Once people hear this, they think ‘how much will it cost?’. They don’t think “how much will l save in the long run?”. So instead of calling us to get advice first, they make the decision on their own.
Then later down the track, when things go wrong, they contact their accountant and want the consequences reversed. Since they can’t be reversed, they want the damage to be minimized, usually it is all too late!
It is very important to Look before you Leap!! Obtain all the information first and then make an informed decision, rather than wait till the horse has bolted.
As an example:
When first setting up your business you need to decide on a business structure. What I mean by this is – will you be operating as a:
- Sole trader;
- Partner in a partnership;
- Through a company;
- A discretionary trust;
- A unit trust, etc.
But rather than ‘pick a number out of a hat’, you are best to contact your accountant and discuss the choices with them, before deciding on the structure that is right for you.
Don’t forget – what is right for you today is not necessarily right for you in the years to come.
I came across an article in the Sunday Times the other week and it talked about “Beware love’s liability” by Noel Whittaker.
A home was purchased for the mother to live in and was held in the name of the testamentary trust. When the mother moved into aged care the family sold the house for $2 million, the home cost $400,000. After the sale was completed they found out the entire profit of $1.6 million was a taxable capital gain.
As the house was purchased in the name of the trust, the capital gain tax exemption on the main residence was lost and they were only eligible for the 50% capital gains discount.
As Noel points out – ‘This case illustrates the importance of taking expert advice before major transactions are completed’.
The question to ask yourself is not “how much will it cost to get the advice?” but rather “how much will I save if I have the correct tax advice?”
If you need any assistance, please call or email Optima Partners, prior to making any decisions, it could save you money!
ZOI YANNAKIS – ACCOUNTANT