Moving your agency into a company or trust? Record what moves, and what it is worth, on the day.

A restructure valuation sets the market value of an agency, rent roll or client book at the date it moves between entities you control, such as from a partnership or family trust into a company. Your adviser decides whether a rollover, such as the small business restructure roll-over in Subdivision 328-G, applies. A value at the transfer date can matter either way: for related-party pricing, ownership shares and later CGT records. The fee is set by the revenue of what moves: $1,495 + GST under $2 million, delivered in 2 business days. Delivery time starts once payment and all required information have been received.

Why do agencies restructure?

Agencies change structure as they grow. A sole trader or partnership moves into a company. A real estate agency puts its rent roll into a separate entity from its sales business. A broker moves an insurance or trail book into a new company before bringing in a partner. A group interposes a holding company above the operating company.

In each case something of value moves between entities the same people control. Your accountant and lawyer design the restructure and decide the tax treatment. We value what moves, at the date it moves, and write down how.

What does the small business restructure roll-over require?

The ATO describes the roll-over in Subdivision 328-G as letting small businesses transfer active assets from one entity to another without an income tax liability at the time. In general terms, the conditions include:

• ·Each party is a small business entity, or is affiliated or connected with one, or is a partner in a partnership that is one, with aggregated turnover under $10 million
• ·The assets are active assets, such as CGT assets, trading stock, revenue assets or depreciating assets used in the business
• ·The transfer is part of a genuine restructure of an ongoing business, not an artificial or inappropriately tax-driven scheme, with a safe harbour rule as an alternative way to meet that test
• ·The transfer does not change the ultimate economic ownership of the assets, and where several individuals own them, each individual's share is maintained
• ·Discretionary trusts may meet the ownership test where there is no practical change in who benefits; family trusts with a family trust election have an alternative test

If the roll-over needs no market value, why value the agency?

The ATO says the roll-over does not require market value consideration, or any consideration, for the transferred assets. A valuation can still matter.

Ownership shares: if two partners with different interests move the agency into a company, the shares each receives should reflect what each contributed. The ATO's own example shows a restructure failing the roll-over because the owners' proportions changed.

If no roll-over applies: a transfer between parties not dealing at arm's length for more or less than market value is generally treated for CGT as if made at market value, under section 116-30.

Other taxes: the ATO notes there may be stamp duty or GST consequences, which the roll-over does not remove. State duty is a question for your adviser.

Later records: a value at the restructure date supports the $6 million net asset value test, a later sale and any 30 June 2027 position. See 30 June 2027 market valuations for agency owners.

What other rollovers might your adviser consider?

The ATO notes that businesses that do not meet the small business restructure roll-over may have separate rollover relief when transferring a single CGT asset or all business assets to a company, if conditions are met. For an agency already run through a company or unit trust, Subdivision 615 lets members choose a roll-over where they and at least one other member own all the shares or units and, under a scheme for reorganising its affairs, exchange them for shares in a new interposed company and nothing else. Further conditions apply.

Goodwill needs care. The ATO's incorporation guidance says a capital gain on recognised goodwill transferred to a company is taxable unless relief is available, pointing to the small business active asset concessions. For an agency, goodwill and the client book are often most of the value.

What exactly moves in an agency restructure?

Each item may need its own value, or at least its own line in the report.

• ·The rent roll, insurance book, trail book or client contracts, and the right to the income they produce
• ·Goodwill, including the brand, website, phone numbers and systems
• ·Work in progress and unbilled fees, which matter for marketing, recruitment and advice businesses
• ·Plant, equipment and fit-out
• ·Staff and accrued leave: the ATO explains how assumed leave liabilities are treated on incorporation
• ·Licences, trust accounts, supplier and insurer agreements, whose transfer is a question for your lawyer

What does a restructure valuation cost?

The band is set by the revenue of what moves. Where the report values more than one entity, such as the old entity and the shares issued by the new one, each additional entity adds $795. If the restructure has already happened, a valuation at that past date adds $495.

The band is set by the annual revenue, excluding GST, of what is being valued: a rent roll's annual management income when the rent roll is valued on its own, an insurance or mortgage book's annual recurring income when the book is valued on its own, or the agency's total annual turnover when the whole agency, or shares or units in it, are valued. A business on exactly $3 million is Medium, and one on exactly $10 million is Large. Add-ons: +$495 per retrospective (past) valuation date, and +$795 per additional entity. Delivery time starts once payment and all required information have been received.