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As uncertainty reigns about the federal government’s proposed changes to capital gains tax, studies have found that most families are still hesitant to discuss monetary matters – especially when it comes to difficult issues including inheritance and succession plans.
Recent research by J.P. Morgan’s Family Wealth Institute shows the biggest threat to some of Australia’s family fortunes may lie in the conversations left unsaid at the dinner table.
It found 70 per cent of family members struggle to discuss their family wealth and one in five avoid having the conversation altogether until a crisis forces it into the open.
However, principal partner at wealth advisory Fitzpatricks WA, Garry Symonds, said the proposed capital gains tax changes had sparked fresh discussions on inheritance and business succession.
“I’m not sure we’ve spoken about much else in the last two weeks,” he said.
“A friend of mine from a law firm sent me a brief this morning about the Treasury laws amendment tax reform that was introduced to parliament.
“Apparently, there’s 160 pages of it, so a lot to go through. The hardest thing is not really knowing what the detail is going to look like.”
Currently, businesses with a turnover of up to $2 million and net assets of up to $6 million do not need to pay any CGT if the owner is over 55 and has held their business for at least 15 years.
They also receive a further reduction on top of the existing concession, making their CGT discount 75 per cent.
Capital gains are also exempt up to a lifetime limit of $500,000 if the gain is put into super, with an ability to defer the gain for two years.
While the government is still considering possible exemptions to the proposed legislation, Symonds said the recent research and conversations around capital gains had laid bare the emotional strain of intergenerational wealth.
“There haven’t really been major legislative changes for the past number of years, so it’s been a fairly stable environment that allows you to plan,” Symonds said.
“I think just the uncertainty at the moment doesn’t help from a business confidence point of view.”
Symonds said his role requires a more nuanced and relationship-driven skill set than other financial advisory roles, built around long-term family strategy and continuity.
“Clients aren’t looking for smarter advisers, they’re looking for safer conversations,” he said.
“You need to know their story and understand their values to earn the right to influence those decisions.
“The money side is 20 per cent, and the other 80 per cent is family dynamics, communication, governance and decision-making.”
Symonds said it is important to understand what the money represents emotionally to different family members.
“Every client I have ever worked with at this level has come to me with the same question. Is my family going to be okay, not financially okay but actually okay,” he said.
“It’s a question few in this industry are trained to answer, but it’s the only question that matters because it shapes whether the wealth strengthens the family or fractures it.”
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