Asset Protection

If a Lawsuit Hit You Today or if the ATO Began an Action Against You, Just How Confident are You that Your Assets are Safe and Would Stand The Test?

 

 

Let’s be crystal clear about this… anyone with assets is at risk so you must be 100% certain what you’ve worked long and hard to accumulate is fully protected.

Have you built an impregnable “WALL” around your assets?

If not,you need to act NOW.

Once a lawsuit or government action has begun, there is nothing you can do. Nobody can help you without charging a fortune and potentially breaking the law.

The fact is, once you have been sued or are being pursued, if you attempt to move assets or protect them, you can fall foul of laws designed to stop you from avoiding legitimate obligations to creditors.

The harsh reality is, every business owner is one day away from losing everything. It just takes one government winding up notice, or lawsuit, and it’s all over.

Ironically, the best time to protect assets is when things are good. Once it’s all gone bad, it’s harder and more expensive to do anything.

Let’s be clear, the most dangerous position to take is…

“That’ll Never Happen to Me. I Always Do the Right Thing by People and Pay My Taxes on Time”

Sounds good in theory?

Wrong!

Most lawsuits and ATO-initiated action aren’t fair.

Honest decent business owners get sued all the time, or fall behind in their BAS because in many cases, they have a choice between paying their suppliers or the ATO.

Or as happened to me once, somebody sued me because, by their own admission, they had a sick daughter and desperately needed some money!

If you think “it’ll never happen to me”, consider these statistics …

  • The average business owner in Australia gets sued 3 times in their lifetime, with a greater than 50% chance of a devastating lawsuit which can WIPE THEM OUT
  • More businesses go broke from action by the ATO or other government agencies directly or indirectly than anything else
  • 1 out of every 4 people (on average) get sued
  • There is a lawsuit happening every minute
  • NSW is the 3rd most litigious State in the world behind California and Texas, with Victoria not far behind

It goes further …

You can even be liable for the debts of others in your business in some circumstances, no matter how well protected you are, eg. partnerships, badly structured trusts.

Consider these situations:

  • Since 2012, the ATO have a zero-tolerance policy on small businesses who don’t pay their BAS debts on time. As well as winding up your business, they will go after your home, bankrupt you, and show you no mercy
  • As a company director, you can be liable for unpaid PAYG, GST and superannuation, EVEN IF you left it up to other director and had no involvement
  • Since 27 June 2012, you can be personally liable for PAYG and superannuation as a director for not lodging your BAS on time, even if you wind up your company
  • You can be liable for back taxes and penalties because the government arbitrarily changes an administrative policy

And there are many other examples.

If you don’t plan for asset protection in Australia for your business and personal assets, you put your and your family’s financial security at serious risk.

Don’t think for a minute, as many do…

“I’ll be fine ... I Have Insurance.That’ll cover me

Have you read your insurance policy cover to cover? If not, like most people, how do you know what they are covering you for (or not covering you at all)?

There are many reasons why your insurer may refuse to cover you:

  • You breached the fine print of the policy
  • You failed to declare a fact you thought immaterial but under the policy was required to be declared to the insurer (this happens more often than you think)
  • You failed to notify your insurer of the claim or potential claim within a reasonable period (eg. you receive an email threatening a lawsuit … if you fail to report it to your insurer, they may be able to deny part or all of their liability)
  • You have a large excess and are forced to defend an unfair lawsuit
  • You are guilty of “criminal negligence” (which doesn’t mean you’ve committed a crime, but it means you’ve ignored or neglected an obvious risk)

As you can see there are many avenues for things to go wrong.

This is not just restricted to business owners…

I Don’t Have To WorryI Am An Employee.

My Employer Will Protect Me”

 

Again, maybe, but don’t be so sure.

If you believe an employee cannot be sued, you’re in for a rude shock.

In Houghton v Arns(1996) High Court decision, an employed website designer was hired to build an ecommerce shopping cart. The designer made certain promises which turned out to be wrong, and cost a lot of money to the client.

The designer’s employer went broke, so the client sued the website designer directly. The designer was held to be personally liable to the client.

A sobering result, again confirming whether you’re an employee or business owner, asset protection in Australia is critical.

And don’t think for a minute…

But I don't have much money or many assets.

I’ll just wait until I do...”

 

That is the WORST THING YOU CAN DO!

Let’s give you a real life example

We had a client come and see us. He and his wife had $2 million of assets. He had worked hard all his life as an investment advisor, and was close to retirement age. One day, he recommended to a number of his clients to invest in an overseas investment which had been producing great returns for years. Just before retirement age, the investment went broke, and his clients lost a fortune. He was not covered by his professional indemnity insurance because he didn't follow the strict conditions of his policy, ie. the policy told him which companies he could recommend for investment, and this overseas company was outside the range. The consequences were potentially disastrous because if he is sued, most of his assets are exposed because they are in his own name. Even his wife's assets were at risk because she was a director in his company until recently. Suddenly his hard earned wealth was not as secure as it was before … and due to the stress of the situation, his 30 year marriage came to a sad and bitter end …

 

 

 

A sobering story, and sadly, all too common.

Many clients start a business, buy property or shares in their own name because they don’t have much money, or their accountant tells them to “save money”.

You may save money now, but later on, you could be liable for a fortune in tax or lose all it through litigation.

The problem is, once people make their first million (or thereabouts), they often realise they’re paying far too much tax and their assets are vulnerable.

They come to see us to reduce their tax and protect their assets from possible lawsuits.

The problem is, because it is already in their own name, we cannot transfer the assets without capital gains tax or stamp duty, as well as clawback rules under bankruptcy law.

So ensure you invest the time and effort to get your asset protection solutions right before you trade, invest or do business in Australia.

Yes, it saves you in the long run!

So what are the best structures to protect my assets?

It depends on your situation.

But as a rule, the rich and high net worth individuals use companies and trusts, or even self- managed superannuation funds.

These are very powerful, and in many instances, not only keep your assets safe, but allow you to wind up your business, and have a “get out of jail free” card, or fresh start, with your debts.

To read more about companies and trusts Click Here

One very powerful asset protection strategy uses overseas structures. To find out more about international structures, Click Here

What if I already have assets in my own name? Or if I have set up my business in my own name? Is it too late?

Not at all. There are still things you can do. It just costs more, and it will take time for your strategy to be effective. But better to do it now than leave it, and be sorry later on.

You can, of course, transfer the assets into a family trust or company or other structure (in certain situations). However, you will be liable for stamp duty and (probably) capital gains tax, as well as having a 5 year clawback period under bankruptcy law to wait out.

Another possibility is to set up family trusts, or companies, and use these structures to take a second mortgage or caveat over your assets.

Or in some situations, where there is a solid commercial reason, you can restructure your business, and in doing so, make your structures more robust to protect your business and personal assets.

To find out more about these second mortgage and other strategies, Click Here

So Moving Forward, How Do I Protect Myself?

To learn more about asset protection, go to our Blog, or Click Here or you can read our frequently asked questions on asset protection, Click Here

[su_panel background="#e8e8e8" color="#187DA1" border="#187DA1"]Contact us today to ensure your assets are properly protected. You can either contact us on 1300 669 336 or click here to organize a free consult no obligation.[/su_panel]

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