When a business or other venture fails, the primary concern many people have is their level of personal liability. Mainly, “How much am I personally liable for, and will it impact my family?”.

Particularly after changes to the DPN regime, company directors now carry personal liability for:

• outstanding BAS/PAYG
• outstanding employee entitlements, including superannuation
• loans with a personal guarantee
• debts incurred if the company was trading while insolvent

With the family home often the most valuable asset a person owns, a question we hear from many struggling business owners – and individuals facing a difficult life situation – is, “could I lose my house?”.

Unfortunately, the truthful answer is often a resounding yes. That is unless you have put in place certain measures to protect the family home well ahead of time.

What it means to protect the family home

Asset protection is rarely considered by people who don’t feel they have anything to lose. But it’s the first thing in question when life or business plans don’t pan out.

This could include:

• business failure
• lawsuits
• divorce
• sudden illness or death
• sudden debt incurrence (i.e. you’re a guarantor on a loan)
• failure of a non-profit business of which you’re a board member

When the family home is in your name, it is technically your asset. If it is in yours and your partner’s name, 50% of the value is at face value your asset.

Many people believe that having their name on the mortgage is crucial to securing the loan or securing new loans in the future. However, the way a loan is structured and repaid can also place the family home at risk.

Finding a strategic balance between ownership and risk is a key element of effective asset protection and one that’s well worth considering while life is going well.

The right strategy to protect the family home

It’s no secret that the family home is generally your most significant asset. It also offers one of the best tax minimisation strategies available: no capital gains tax (CGT).

The solution is to find an ideal structure which maximises benefits such as tax minimisation, while mitigating the risk of loss. 

There are many ways to own a family home, such as:

• in one name
• in joint names
• within a trust
• under a company

With this in mind, an asset protection specialist can help you understand the pros and cons of the various structures to find the ideal scenario for you. This includes considerations around obtaining future finance, reducing tax, and protecting the family home against high-risk situations.

It’s important to remember too that asset protection is not a set-and-forget activity. The asset protection lifecycle evolves because life is constantly evolving – a fact that has never been so true than in recent times.  

Find a strategy that works for you

There is no one-size-fits-all strategy for asset protection or tax minimisation. But with the right advice and guidance, you can design a fit-for-purpose strategy that goes a long way towards protecting yours and your family’s wealth against the unforeseen.

At RSM, our tax and asset protection specialists are skilled in developing strategies that account for your:

• personal situation
• appetite for risk
• potential for risk
• future goals
• current financial strategies
• legal obligations

Timing is crucial because it’s near impossible to implement robust strategies during a crisis. For example, you cannot shift your personal liability if you are already facing legal action nor can you generally turn back the clock to implement strategies to safeguard your home from a bankruptcy trustee.  

Putting a plan in place now could be the difference between asking if the family home is at risk at some point in the future, and knowing that you have done all you can to safeguard it.  

HOW CAN RSM HELP?

For a confidential discussion and personal evaluation of your financial assets and strategies, contact your local RSM office today.