I was introduced to Matthew last week and we had a conversation that was worth $400,000 to him.
Matthew had been working for a business for over 10 years and had decided that it was time to move on and do his own thing.
His employer had drafted an agreement for him to sign which included a termination payment of $800,000. Matthew was looking for advice on the tax implications of this agreement, and was shocked to learn he be up for almost $400,000 in tax.
He told me that the money was supposed to represent payment for his share of a business venture between himself and the company.
He had mentioned the payment to his accountant and was told that it would be taxed as a capital gain, and he would pay about $200,000 in tax. Crucially, his accountant hadn’t reviewed the documentation for him.
Matthew and his employer were very clear that this payment was for his share of the business. Unfortunately as they hadn’t done this before they had fallen back on previous termination agreements with employees and and adjusted the payment amounts.
Working with Matthew’s solicitors we were able to have the agreements structured to reflect what was actually happening.
Based on this, we obtained specialist tax advice that identified Matthew as being eligible for the Small Business Capital Gains Tax Concessions. What this means for him is that he will not be liable for any capital gains tax on this transaction at all – a $400,000 reduction in his tax liability.
Not a bad day’s work.
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