Handing a business to your children is both a family decision and a tax event, and treating it as only the first one is how avoidable tax bills and family disputes happen. A will that simply says "the business goes to my children equally" can create exactly the kind of ambiguity that ends up being resolved by lawyers, not by the family, after you're no longer there to clarify what you meant.
Planning to pass the business to the next generation? Get the legal and tax plan aligned while there's still time to shape it.
Book a Free Consultation →Why a Will Alone Isn't a Succession Plan
A will deals with what happens to your assets on death. Business succession, done properly, usually needs to answer questions a will was never designed to cover: whether one child is already working in the business and others aren't, whether ownership should transition gradually while you're still involved, and what happens if not every child wants, or is suited, to run the business. "Equal shares to all children" sounds fair on paper and is often the exact arrangement that causes the most conflict in practice, particularly where only some children have been active in the business.
Buy-Sell Agreements: Planning for the Unexpected
Where a business has more than one owner, whether that's siblings, a parent and child, or business partners, a buy-sell agreement sets out what happens if an owner dies, becomes unable to continue, or wants to exit. It covers who can buy the departing owner's share, how it's valued, and how the purchase is funded, often through insurance held for exactly this purpose. Without one, the remaining owners and the departing owner's family can be left negotiating these terms from scratch, at the worst possible time to be negotiating anything.
If the business is held in a trust, how it can be passed on also depends on the trust deed. Our guide on the Bendel decision covers recent changes affecting trust distributions.
The Bendel Decision: Trusts, UPEs and Division 7A →Transferring a Business Is a Tax Event, Even Within the Family
Transferring business assets or shares to a family member, even for no payment, is generally treated as a disposal for capital gains tax purposes, and can also raise stamp duty depending on what's being transferred. Small business CGT concessions and specific rollovers can sometimes reduce or defer this, but eligibility depends on conditions that need to be checked well ahead of the transfer, not assumed to apply because the recipient is family.
When Succession Planning Should Actually Start
Well before you intend to step back, ideally five to ten years ahead for a business of any real complexity. Proper succession planning takes time: preparing the next generation to actually run the business, restructuring the ownership if the current structure doesn't support a clean transfer, and putting the legal documents (wills, buy-sell agreements, updated trust deeds) in place while there's still room to get them right. Leaving this until retirement is imminent narrows the options considerably, often to whichever solution can be implemented fastest rather than the one that actually suits the family and the business.
How Phan Campbell & Associates Can Help
At Phan Campbell & Associates in Footscray, we plan business succession as one exercise, not two separate ones: our wills and estate team on the legal documents, and our accounting team on the tax position and structure, working from the same plan. This is exactly the kind of decision that benefits from legal and financial advice being developed together rather than reconciled after the fact.
If passing the business on is somewhere in your future, the earlier we start planning, the more options remain open.
Frequently Asked Questions
1. Is passing a business to my children just a matter of updating my will?
No. A will deals with what happens on death, but a business succession plan usually needs to cover what happens well before that: whether children are actively involved now, how ownership transitions while you're still alive if that's the plan, and what happens if only some of your children want to be involved in the business. Relying on the will alone often leaves these questions unanswered until it's too late to plan around them.
2. What is a buy-sell agreement and do we need one?
A buy-sell agreement sets out what happens to a business owner's share if they die, become incapacitated, or want to exit, including who can buy it, how it's valued, and how it's funded (often via insurance). Without one, co-owners or their families can be left negotiating these terms during an already difficult time, with no agreed process to fall back on.
3. Does transferring a business to a family member trigger tax?
Potentially, yes. Transferring business assets or shares, even to a family member and even for no payment, can trigger capital gains tax and, in some cases, stamp duty, unless a specific concession or exemption applies. Small business CGT concessions and other rollovers can sometimes reduce or defer this, but eligibility needs to be checked well before any transfer takes place.
4. When should succession planning start?
Well before you intend to step back, ideally five to ten years ahead for a business of any complexity. Succession planning done properly takes time: preparing the next generation, restructuring if needed, and putting legal documents in place. Leaving it until retirement is imminent significantly narrows the options available.