Joondalup Office: Suite 30,
ECU Business Innovation Centre,
15 Barron Parade, Joondalup, WA, 6027
(08) 9256 3788
info@cwmm.com.au



Your End Game


Planning Your Business End Game

Business Succession Planning Solutions

What is a business succession plan?

It is a documented plan that includes providing for structured transition of ownership to the remaining business partners or family members. It also ensures that your family receives the value you have built up in the business. It provides for the business surviving if you are ill or injured. It can also be used to retain key staff.

What does a business succession plan aim to achieve?

The purpose of having the plan is to take into consideration needless Capital Gains and other Tax. Provision is made for adequate funding to transfer ownership. Some of the things that can trigger the need for succession are Disability, Divorce, and a health Trauma event such as a heart attack or stroke, becoming of unsound mind or retirement.


Why should I consider business succession planning?

There are a variety of reasons, but if you were to suffer from an accident, heart attack or some other life altering event, have you planned for the following:

  • Selling your interests to your business partners, a third party or employees?
  • Keeping your business for your family?

Who arranges all the documentation and manages the process?

At Cedar Wealth in Perth, Western Australia, we offer an all-inclusive service to manage the whole process. Although we are not lawyers or tax advisors, we understand the tax and legal implications of having your business succession affairs well arranged. As trusted advisers, we take care of the process of arranging the following:
1. Valuing the business with your accountant.
2. Arranging formal documentation with knowledgeable lawyers.
3. Setting in place funding arrangements to cover the three main events:

  • Life insurance (if you pass away)
  • Total and permanent disability
  • Trauma (Cancer, heart attack or the like)

How should the succession plan be funded?

There are generally six accepted methods of funding the succession:

  • Borrow funds from the bank.
  • Start a sinking fund.
  • Write out a cheque.
  • Agree on vendor terms.
  • Insurance.
  • A combination of the above.

What is generally done?

No two businesses are identical, but as a general guideline it is often most economical to use insurance as the funding vehicle.

Who advises on how the insurances should be owned?

Cedar Wealth will discuss this in depth with you and provide advice on the best way, because each business is unique and has its own set of needs. We work with your Accountant and Lawyer to ensure that your affairs are correctly set up.

Key person solutions
What is key person insurance?

Key Person Insurance is cover that is designed to provide capital to a business following the loss of an important or “key person”, which, may in turn, cause a loss of income or even capital to the business. In most cases the key person’s ongoing contribution to the business will cease if he or she were to suffer from a trauma event, Total and Permanent Disability (TPD) or die.

How does key person insurance work?

Along with your Cedar Wealth Adviser, your business should take the following action:

  • Identify who the key personnel of the business are.
  • Estimate and document the key person’s net contribution to the business by considering how much the effect of losing that person would cost your business financially.
  • Take out life, disability and/or trauma insurance to protect the business from the impact of losing your key personnel. The sum insured will be determined by the estimation of the key person’s net worth to the business.

Who owns the policy?

The company owns the policy on the life of a Key Person. Because the purpose of Key Person Cover is to provide funding for the business to continue following the loss of a key individual, the proceeds paid out are taxed at company tax rates.

The premiums that are paid are seen as a deductible expense to the business.

Some of the general conditions that need to be met for tax purposes:

  • Must be term insurance.
  • The employee must be a key person and the loss of that employee due to death, trauma or TPD would result in significant loss of profits to the business.
  • The sum insured needs to be based on a reasonable estimate of the loss of revenue that would occur.

Where to from here?

Call us on (08) 9256 3788 for your complimentary consultation.

Alternatively you can Contact Us and we’ll be in touch to set an appointment time that is convenient to you.

None of the above has been prepared without considering your personal objectives, financial situation or needs. Therefore, before acting on it, please consider if it is appropriate to your specific circumstances. You should also seek advice from your tax adviser in relation to tax matters and you should seek legal advice from your lawyer in relation to legal matters.