Family businesses recommend dedicated federal minister, tax changes as part of parliamentary inquiry
The Coalition is urging family businesses to have their say as part of a federal parliamentary inquiry, with more than 26 other businesses and government departments having already recommended changes to laws regarding family-owned companies.
Among the recommended changes include the establishment of a minister responsible for family businesses, a change to the tax code affecting employee share schemes and an easier way to transition ownership from one generation to the next.
These issues have been discussed in various studies of family business structures. However, despite the discussion over tax codes and proposed changes, many family businesses haven't developed a succession plan.
So far, 26 businesses and organisations have made submissions to the Parliamentary Joint Committee on Corporations and Financial Services, chaired by federal Labor MP Deborah O'Neill.
Sam Kennard, managing director of Kennards Self Storage, said in a submission that while family businesses have enjoyed some success, there is more to be done. He points to curriculums in the United States that include family business as an area of study, and notes the manner in which family businesses operate around long-term plans to ensure brands survive across generations.
"Our decision-making is not confined to reporting periods and bonus horizons but reflect a vision over decades," he said.
"This contrasts starkly with much of the listed corporate sector whose leadership it is observed operates in short term and even mercenary."
Kennard said the Federal Government needs to formalise communication with family businesses, and identify obstacles and regulations that inhibit multi-generational ownership.
Another small business, Queensland's Packer Leather, said it had been operating since the 1890s, but has encountered trouble despite owning such an experienced brand. Graham Packer said the government needs to introduce the office of family business minister.
"Family businesses have long-term goals, commit their whole-of-life philosophy to making a success of their business in the hope that the next generation will follow on," he said.
It isn't just smaller businesses clamouring for change, though. Larger tax giants like KPMG have advocated for similar reforms, with its submission advocating the establishment of federal and state portfolios responsible for the sustainability of family businesses separate from the role of small business minister.
Other recommendations included that treatment of capital gains for intergenerational transfers should mirror those for assets passed on after death.
"Alternatively, the transfer of a family's ownership interest in a family business, as defined, to another member of the family should not be regarded as a change in ownership tantamount to a disposal," KPMG said in its submission.
Overall, KPMG said, the contributions of family businesses to the overall economy are large but unsupported by government policy.
"The development of policy initiatives to support family business therefore needs to be broader than simply offering specific relief from taxation for transfer of business interests or assets as part of succession planning," it said.
One submission, from MGI Australia, has recommended a change to employee share schemes in family businesses that would defer the taxing point on discounted shares until the shares are sold.
However, the Treasury has poured cold water on that idea, saying it already provides a sufficient employee share scheme. It also said a key problem identified by MGI – a lack of liquidity – is not just experienced in family businesses but businesses in general.
"The government has stated that it considers the current concessions strike the right balance between aligning the interests of employees and shareholders," it said.
Opposition small business spokesman Bruce Billson, who was contacted by SmartCompany this morning but was unavailable, said in a statement last week that with submissions due on Friday (November 30), family businesses should be encouraged to identify areas for improvement and then point them out.
"While family businesses have many advantages and a proven record of success, challenges exist such as when the dining room table becomes the boardroom table and family structures morph into business structures and with policies and laws that inadequately reflect the family business dynamics."
A PWC report earlier this year found that 56% of local businesses have experienced growth over the past year, compared to 65% globally. Also, 26% of local family businesses have shrunk in size.