Benjamin Franklin said there were only two things certain in life – death and taxes. And while many of us make healthy choices to extend our lives as long as possible, there is not a whole lot that can be done to avoid paying tax. Tax that seems to be ever on the rise.
However, in what is a pleasing moment, last week – July 1st 2016 – saw the NSW Office of State Revenue remove stamp duty tax on the transfer of business assets (other than land or property). You may think you’ve seen this before (and you have as this is not the first time this reform has been proposed) but finally change is here. NSW stamp duty will no longer apply to the transfer of shares in companies, units in unit trusts, or business assets such as goodwill and intellectual property. This is great news for financial planning practice buyers and sellers alike.
Stamp duty has never been a popular tax (if one can argue that any tax is ‘popular’) as its applied during high value transactions when people are already feeling pressure and stress about the agreed asset value, loan terms, deposit requirements and other emotional aspects attached to transacting a high value asset. Every one of us who has bought property has paid stamp duty and, I would hazard a guess, has also lamented about how that money could have been applied toward the actual purchase of the house, or future renovations, or family holidays, or furniture, or retirement, or….
I read an interesting article recently about stamp duty in my property market, Sydney’s Northern Beaches, now costing more than a year’s salary. Many peninsula buyers are paying the State Government more than $100,000 for the privilege of buying a house. The rise of property values, and consequently stamp duty as a percentage of house values, is prohibiting many people from owing their first home or downsizing around the time of retirement. Surely a review of this tax and change is warranted.
The abolishment of stamp duty on the transfer of business assets is definitely a step in the right direction. Being able to apply that five percent of sale value toward improved business processes, marketing campaigns, new client acquisition, hiring of talent and growing of the business can only provide a stronger incentive for buyers to transact.
As a result, I predict increased buyer activity over the coming period and encourage any practice owners thinking about selling their business to begin the preparation process for sale now.
Chris Wrightson. Founder and CEO at Centurion Market Makers, the industry experts in the sale, acquisition and management of financial planning firms. If you’re planning on selling your firm in 2017, we’d love you to call us for a confidential discussion, or continue browsing our website for more tips, tools and info on the steps to take when buying or selling your financial planning firm.
Share this Post