Changing a business structure can make sense when a business grows, ownership changes or existing tax arrangements are no longer suitable. However, restructuring is not simply an administrative exercise. Moving a business or its assets from one structure to another can trigger significant tax and government charges.

In this episode of The CEO Breakdown, John Saade discussed the potential costs facing Australian businesses as trust tax reforms approach. While proposed federal concessions may provide some relief for eligible businesses restructuring out of discretionary trusts, state-based charges such as stamp duty may still apply.

For business owners, the key lesson is simple: changing your structure requires more than looking at the tax rate of the new structure. The costs of transferring assets, property and business interests also need to be considered.

Why Do Businesses Change Their Structure?

Businesses can operate through several different structures, including sole traders, partnerships, companies and trusts. The most appropriate structure can change as a business evolves.

A business owner may consider restructuring because:

• The business has grown significantly.
• There are new shareholders or owners.
• Asset protection has become a priority.
• The business is preparing for a sale.
• The owners want to change how profits are distributed.
• The existing structure has become less suitable.
• Tax legislation has changed.
• The business is moving towards succession planning.

However, a structure should not be changed solely because another structure appears to have a lower tax rate.

The costs of moving existing assets into the new structure can be substantial.

What Tax Costs Can Arise When Changing Structure?

When a business moves from one structure to another, the transaction can potentially have several tax consequences.

Depending on the circumstances, these may include:

• Capital gains tax
• Stamp duty
• Land tax considerations
• Tax on asset transfers
• GST implications
• Professional and legal fees
• Financing and refinancing costs

The exact consequences depend on the assets involved, the existing and proposed structures and the relevant federal and state legislation.

This is why business owners should obtain professional advice before transferring assets.

The Trust Restructure Problem

Trusts have historically been used by many Australian business owners and investors for asset holding, income distribution and other planning purposes.

However, changes to the taxation of discretionary trusts could cause some business owners to reconsider their existing structures.

As John Saade explains in the CEO Breakdown, proposed federal reforms involving a minimum tax on certain discretionary trust distributions could encourage businesses to consider moving from trusts into company structures.

On the surface, this may appear straightforward.

But there is another layer.

Federal tax relief does not necessarily switch off state taxes and duties.

Stamp Duty Could Be the Hidden Cost

Stamp duty is one of the major costs business owners need to investigate before restructuring.

If assets are transferred from one entity to another, the relevant state or territory may impose duty depending on the nature of the transaction and the assets involved.

This can become particularly significant when valuable property or land is held by the existing structure.

John Saade highlights the disparity between jurisdictions, with some states potentially imposing substantial charges when businesses restructure.

Why State-Based Costs Matter

Australia has multiple levels of government, and changing a business structure can potentially involve both federal and state taxation systems.

A federal government concession may make a restructure more attractive, but that does not automatically mean the transfer will be free of state charges.

For a business holding significant property or other assets, the difference can be substantial.

This is why business owners should consider the total cost of restructuring, rather than focusing on one tax concession.

Property Can Make Restructuring More Expensive

Businesses that own land or property need to be particularly careful.

Transferring a property from a trust to a company, for example, may potentially create tax and duty consequences even where there is no intention to sell the property.

The owner may view the transaction as simply moving an asset from one structure to another.

The tax system may treat it as a transfer with its own consequences.

Before restructuring, businesses should identify:

• Land and property owned by the current entity
• The current market value of those assets
• Existing debt attached to the assets
• Potential capital gains
• Applicable stamp duty
• Land tax implications
• Whether any rollover or concession may apply

This assessment should happen before the restructure is implemented.

State Stamp Duty Rules Can Differ

One of the challenges highlighted by John Saade is that state taxation rules are not uniform.

A restructure that produces relatively limited costs in one state could potentially create a much larger liability in another.

This is particularly important for businesses operating across multiple states or businesses holding significant property.

The result is that two businesses with similar assets and structures can potentially face very different restructuring costs depending on where their assets are located.

Don’t Assume a Federal Concession Covers Everything

Federal tax concessions can be valuable, but business owners should carefully check what they actually cover.

A concession may provide relief from a particular federal tax consequence without eliminating:

• State stamp duty
• Land tax
• Professional fees
• Valuation costs
• Legal costs
• Financing expenses

The distinction can make a major difference to the overall economics of a restructure.

Should You Move From a Trust to a Company?

There is no universal answer.

For some businesses, moving to a company may make sense. For others, the existing trust structure may continue to be appropriate depending on their circumstances and the applicable tax rules.

Before making a decision, business owners should compare:

Existing Structure

Consider:

• Current tax obligations
• Asset ownership
• Distribution arrangements
• Asset protection
• Succession considerations
• Future business plans

Proposed Structure

Then assess:

• Corporate tax treatment
• Dividend and distribution implications
• Asset protection
• Administrative requirements
• Future sale considerations
• Restructuring costs

The Cost of Getting There

Finally, calculate the transition costs.

This is the part business owners can overlook.

A new structure might look more efficient going forward, but if moving into it creates a significant upfront tax or stamp duty liability, the overall benefit needs to be carefully assessed.

Don’t Restructure Just Because the Tax Rate Looks Better

One of the biggest mistakes a business owner can make is comparing two structures based solely on their headline tax rates.

Tax is only one component of the decision.

A proper comparison should consider:

• Tax paid today
• Tax paid in future years
• Cost of transferring assets
• Stamp duty
• Capital gains tax
• Compliance costs
• Accounting fees
• Legal fees
• Financing implications
• Asset protection
• Succession planning

A structure that looks cheaper on paper may not be cheaper once all these factors are included.

Plan Before You Transfer Anything

Restructuring should generally be treated as a strategic project rather than a simple administrative change.

Before moving assets, business owners should establish:

1. Why the restructure is needed.
2. What assets will be transferred.
3. What the assets are currently worth.
4. What taxes and duties could apply.
5. Whether any rollover relief is available.
6. What the new structure will cost to operate.
7. How the change affects future distributions and tax.
8. Whether the restructure supports the long-term business strategy.

Getting professional advice after the transaction has already occurred may be too late to avoid some costs.

The Real Cost of a Business Restructure

Changing a business structure can provide legitimate long-term benefits, but the transition itself can create unexpected costs.

The trust tax discussion in John’s CEO Breakdown demonstrates why Australian business owners need to look beyond federal tax changes. State stamp duty can potentially become a major consideration, particularly where valuable property and business assets are involved.

The right question is therefore not simply:

“Which structure has the lowest tax?”

It is:

“Which structure makes the most sense after considering tax, duties, costs, asset protection and our long-term plans?”

That broader analysis can help business owners avoid making an expensive structural change without understanding the full consequences.

Frequently Asked Questions About Changing Your Business Structure

Can changing a business structure trigger capital gains tax?

Potentially. Transferring assets as part of a restructure can have capital gains tax consequences depending on the circumstances. Specific rollover provisions may be available in some situations.

Can stamp duty apply when restructuring a business?

Yes. State or territory stamp duty may apply when certain assets, particularly property or land, are transferred between entities. The rules vary between jurisdictions.

Is moving from a trust to a company always better for tax?

No. The most appropriate structure depends on the business’s circumstances, assets, income, distributions and long-term objectives. A lower headline tax rate does not necessarily mean lower overall costs.

What should I check before changing my business structure?

Business owners should consider capital gains tax, stamp duty, land tax, GST, asset values, financing, legal costs, accounting costs and the ongoing tax treatment of the proposed structure.

Should I restructure before transferring business assets?

Professional advice should generally be obtained before any transfer takes place. Planning beforehand can help identify potential tax consequences and determine whether available concessions or rollover provisions may apply.

Need Help Reviewing Your Business Structure?

A business restructure can have long-term consequences, particularly when trusts, companies, property and valuable business assets are involved.

Latitude Accountants can help Australian business owners assess the accounting and tax considerations of their existing and proposed structures before making significant changes.

Latitude Accountants

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton
📞 1300 706 597
📧 info@latitudeaccountants.com.au

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Disclaimer

This article provides general information only and does not constitute financial, tax, legal or business restructuring advice. Tax laws, stamp duty rules and available concessions can change, and the applicable treatment depends on individual circumstances. Speak with a qualified accountant, tax adviser or legal professional before changing your business structure or transferring assets.