-
Source: ONE News -
Watch Video
-
Related
People need to start planning to avoid feuds over the family business, a tax expert says.
Jo Doolan, a partner at Ernst & Young, told TV ONE's Breakfast that succession plans may be a touchy subject, but they are necessary to dodge the pitfalls of passing on the family business.
"People don't want to talk about their potential demise but it's much more than that - it's if they want to retire early, or what happens when someone is ill and needs to get out of the business," she said.
"So it is a good governance practice to actually talk to the family and work out who should be involved and who shouldn't be involved in the business going forward."
The issue of conflict over family farms was well publicised during the Scott Guy murder trial, and Federated Farmers has said it was a reason there are declining numbers of family farms.
Doolan said inheritance plans need to be talked about as soon as possible so the family members are prepared for their positions.
"If you actually put someone from the family into a position of running the business, and just dump it on them, with adequate training, they're bound to fail.
"You'll get the bitterness and the I told you so coming through from the family. So it is a matter of coaching the person, treating them as if they are any other employee and not part of the family and giving them that support and also the family buy-in."
A key part of treating the family member like a regular employee is paying them a regular salary, she said.
"The most important thing is that you actually pay the person a market salary as they're working their way through the business. And to actually have them working for less than a market salary on the promise of something in the future is tantamount to disaster."
Doolan said if businesses do not pay the market rate for salaries, they can run into trouble with the tax office.