Ahead of the Treasurer’s productivity roundtable this week, partner Christine Fleer writes in the AFR that wealthy families who wait for new measures to be set in stone will find themselves on the back foot, while the better prepared are already reinforcing control, transparency and flexibility, and embedding governance discipline into their day-to-day operations.
“The federal government’s ever-greater revenue demands, the Australian Taxation Office’s increasingly forensic approach to collecting, and the political appeal of taking more from those who have more have been a huge wake-up call for wealthy family groups to systematise their governance housekeeping,” she said.
From the super wealthy right through to the relatively well off, Christine warns that informal decision-making processes, such as un-minuted meetings or undocumented approvals, now carry material risk as inquiries from regulators, counterparties or beneficiaries now require precise records of who made the decision, when, and on what basis.
“Strengthening governance is not about bureaucracy. It is about defined protocols, reliable documentation and the ability to produce information quickly.”
Some top tips from Christine, include:
- Quarterly meetings with formal agendas and minutes, independent participants and secure document storage are now standard practice among disciplined families.
- Trusts, constitutions and shareholder agreements that remain in their original form from decades past can be misaligned with current needs and carry latent risks.
- A single appointor holding all powers is an obvious vulnerability – incapacity or sudden death can trigger unintended transfers of control or costly disputes.
- Tax planning should be approached as an ongoing process, not an end-of-financial-year event, and families should model a range of scenarios based on the impact of potential policy changes
“Few families test their arrangements under simulated stress, such as the sudden incapacity of a key figure, a tax residency change by a family member, divorce or bankruptcy, or a major creditor seeking immediate payment. These exercises can reveal vulnerabilities that may then be addressed well before a real-time crisis forces knee-jerk decision-making.”
