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As businesses scale, trust or partnership structures can become restrictive. Issues may include limited asset protection, challenges winning commercial contracts, reduced buyer appeal, and constraints on reinvesting profits to support growth. When growth exposes structural limitations, it is important to understand how you can restructure the business to welcome future growth. We explore different examples below.
In this scenario, the family business had traded through a discretionary trust for close to 15 years. Mum, dad and the adult children all received fair, commercial salaries. Mum and dad only withdrew the bare minimum for personal use, leaving most profits in the business to provide working capital and fuel the growth and because a family trust requires profit to be distributed, income tax was being paid at the top marginal rate.
Mum and Dad wanted to formally bring the adult children into the business and give them a clear ownership percentage. However, discretionary trusts don’t allow for ownership percentages to be specified. The desire to allocate clear ownership to the kids and the limitations of the trust structure, which forced profits to be taxed at the highest rate even when reinvested all led to discussions about restructuring. Although there’s no transfer duty relief, the business transfer from the discretionary trust to a company did qualify for CGT rollover relief.
In this situation, it is important to model how income tax outcomes would shift after restructuring. Because withdrawals from the business were minimal, exposure to Division 7A rules would remain low if those habits continued. It is also critical to demonstrate that high PAYG Instalments for individuals would be replaced with PAYG Instalments at the lower company rate, improving cashflow. This showed that, over time, the benefits of moving to a company, especially the ability to give the adult children a direct shareholding, would outweigh the upfront transfer duty cost.
After the first 12 months of trading under the new company structure is completed, attention should turn to the practical steps required to transfer shares and formally establish ownership stakes for the adult children.
In this situation, the son took over the family business by taking control of the discretionary trust. He became Director of the trustee company, while his dad resigned. The Trust Deed was updated to make the son the Appointor and Guardian, replacing the dad.
No money changed hands for the business ‘purchase’. Instead, the son agreed to make trust distributions to his mum and dad each year to cover their living expenses. There was no set end point for this arrangement.
The business, like the earlier example, grew significantly and all profits in the trust need to be distributed annually. Most profit and cash are drawn out to support family members and for asset protection, as the industry carries higher risk. Cash that’s withdrawn covers undrawn present entitlements and is only lent back to the business if needed.
Although the trust qualifies for CGT rollover relief to move into a company structure, not much cash is kept in the business. This means large dividends would likely be declared, and our modelling showed the income tax outcome wouldn’t change much. Rollover relief isn’t available for transfer duty, so the benefits don’t yet outweigh the costs.
There’s concern supporting family members over time could end up costing more than if the son had bought the business outright at market value. This could cause conflict, especially if the business declines and can’t support everyone.
In this example, the trading business was a partnership. The business structure needed to be reviewed so the daughter could join her mum and dad in the business. The review highlighted partnerships offer limited asset protection. This meant it wasn’t a viable option for the daughter to join her mum and dad, and a restructure was considered. An external valuer found the goodwill was valued lower than the physical assets. Capital losses were available at the partner level. Modelling showed that using CGT rollover relief would restrict options to split the trading goodwill from the physical assets.
For better asset protection and to give the daughter a clear ownership stake, a new trading company was set up to purchase the goodwill. A new asset unit trust was also established to buy the physical assets.
Although transfer duty was still payable, the daughter’s share in the business entities became clearly defined with shares and units. This delivered much better asset protection than the partnership model. Capital gains tax was triggered because CGT rollover relief wasn’t used, but available capital losses eliminated the liability.
Next-generation leaders often want clarity and certainty in ownership. Discretionary distributions may no longer meet expectations for a clear and equitable stake in the business. When a conversation about succession planning happens in a family business, it is also an opportunity to discuss structure – this will help with setting expectations and creating a culture of transparency across all generations.
As business advisers, we are increasingly seeing restructures that support both commercial objectives and succession goals. Company structures are common for trading entities and they are often combined with trusts to hold specific assets. Every family, their business and investments are different, so any restructure should be carefully considered, ensuring the path forward is clear.
In some circumstances, CGT rollover relief may be available to support restructures. Transfer duty relief however is limited and varies state by state, and therefore costs should be weighed against long-term benefits.
Effective succession considers family dynamics, stakeholder needs and long-term goals, guided by frameworks such as Grant Thornton’s FREEDOM model. When working with a family to meet their succession goals, we work through our FREEDOM model to look to overcome any hurdles for that family to ensure a smooth transition.
The FREEDOM Framework addresses the seven critical areas that must be considered to achieve a smooth, sustainable transition of leadership and ownership within a family enterprise. While every family’s journey is unique, these themes consistently determine whether succession strengthens.
Ensuring the incumbent generation has financial independence beyond the enterprise is fundamental. We work with families to assess whether sufficient wealth exists outside the enterprise, or whether the succession pathway itself needs to generate financial security over time, enabling confidence to step back without compromising lifestyle or peace of mind.
Succession is an enterprise decision and a life transition. We help incumbents explore what comes next, supporting the shift from operational leadership to a new phase that is purposeful, fulfilling and aligned with their personal aspirations.
Choosing a successor is one of the most sensitive and consequential decisions a family will make. This decision needs to be objective and fair, considering capability, readiness and willingness, while preserving trust and relationships across generations.
Successful succession depends on preparation. We work with the rising generation to build capability, confidence and credibility through tailored education, mentoring and support, ensuring future leaders are equipped not just to take over, but to lead well.
Unexpected events can force transition before a family is ready. We help families plan for uncertainty by considering contingencies for illness, incapacity or crisis – protecting both the enterprise and the family if the unexpected occurs.
Alignment around vision, values and long‑term objectives is essential to continuity. We facilitate conversations that bring current and next generations together – creating shared understanding of what success looks like for the enterprise, the family and future generations.
Clear, respectful communication underpins every successful transition. We help families establish trusted forums and processes that support transparency, constructive dialogue and informed decision‑making – reducing the risk of misunderstanding or conflict as roles evolve.
If your business has outgrown its structure, now may be the right time to explore whether restructuring can support both growth and a smoother succession. Please reach out to one of our experts today if you’d like to have a confidential conversation.
In estate planning, the focus is often on technical elements like drafting a will, appointing executors, minimising tax, and ensuring assets pass as intended. While these steps are important, they only form part of the picture.
The 2025 Grant Thornton Family Business Report revealed that only 19 per cent of family businesses have a documented succession plan in place. This finding is both striking and concerning, especially at a time when generational transition has never been more complex, and the stakes have never been higher.
The 2025 family business survey found that 63 per cent of family businesses are already mentoring rising generation family members; 60 per cent are gradually integrating the rising generation into decision making and 31 per cent are engaging external advisors to support development.
