Legal Loose Ends for EOFY

Shutting down unwanted structures
Do you have any redundant business structures such as Trusts or Companies that are not being utilised? Often these entities were set up for a past purpose and were either never used, or no longer hold any assets. If the entity is no longer required then it may be wise to close it down pre EOFY. Reusing existing entities at some future point is not always wise, particularly given the cost to set up new “cleanskin” entities is relatively low. In addition, new structures will not have any unwanted “baggage”.

Division 7A
Start thinking about any loans that companies you control have made to their shareholders or parties related to those shareholders. You will need to complete a Division 7A Loan Agreement for any loans made throughout the year which remain outstanding.  It accordingly may be better to repay any money lent before the end of the financial year.

Business Growth
EOFY is also a good time to review and update your business and marketing plans. It may also be the ideal time to review your business structure. Part of your business plan should be to include succession and exit strategies. Even if you expect to say in business for years, you should still consider ways to maximise your business’ value, minimise its risk and reduce its dependency on the owners. You should also be aware of the new Small Business legislation the NSW Government has introduced which along, with a whole raft of incentives, allows small businesses to change their legal structure without attracting a CGT liability at that time.

Debt Collection
EOFY is the ideal time to chase up any debtors or to write off debts that are unrecoverable. If your business invoices clients, it is important to identify any clients who are not paying their accounts on time, or not paying them at all.

Estate Planning
Apart from your business affairs, take time to also ensure that your own personal affairs are in order such as your Will, Power of Attorney and Enduring Guardianship. Whilst not financial year critical, reviewing your own Estate Planning is an important task that needs to be performed regularly. Do you have a Will? If so, does it need updating? There are lots of reasons why your Will may need to be updated. Just a few include Relationships: perhaps new children, friends or relatives have entered the picture. Or maybe you have married or divorced since making your last Will. In some States and Territories marriage or divorce can completely nullify an existing Will? Relocation: you may have moved interstate or overseas. Different States and Territories have different rules when it comes to estate taxes and the way they treat property. Finances: your financial situation may have changed in some way. You may like to consider creating a Family Trust or a Testamentary Trust, which could help reduce your tax burden, and that of your dependents.