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Move income and expenses around a group of entities

We will document the money moving inside your group so each transfer is what you intend it to be.

Inside a family or business group, money moves because it is needed. One entity has cash and another has a bill. The group thinks of itself as one economic unit, and for most practical purposes it is. Tax law does not. Each entity is a separate taxpayer, and every transfer between them has a character. It is a loan, a distribution, a payment for services, or a gift. If nobody decides which, the law decides afterwards.

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Transfers you chose, not assigned later

Each movement between entities is given a character deliberately, rather than characterised during a review.

The flexibility kept

The group can still support its parts, with documentation that makes each transfer do what you intended.

Balances a lender can read

Intercompany accounts that are documented and explicable make finance and sale processes considerably easier.

What does moving money around a group actually involve?

A group is a set of separate legal entities, usually a mix of companies, trusts and individuals, under common control. Moving funds between them is not an internal transfer. It is a transaction between taxpayers, and its treatment depends on the character given to it. A company lending to a shareholder engages Division 7A. A trust distributing engages the trust provisions and the rules about unpaid entitlements. A payment for services has to reflect what the services are worth.

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Can I just move money between my own companies?

Not without consequences. Each entity is a separate taxpayer, so a transfer between them is a transaction rather than an internal movement. It will be a loan, a distribution or a payment for something. If nobody decides which, the treatment is worked out afterwards and usually less favourably.

What is an unpaid present entitlement?

It arises where a trust resolves to distribute income to a beneficiary but does not actually pay it. The beneficiary is entitled to the money and the trust still holds it. Where the beneficiary is a company, this can engage Division 7A, so the arrangement needs thought rather than repetition.

Do we need service agreements between related entities?

Where one entity genuinely provides services to another, yes. The agreement records what is provided and at what rate, and the rate has to be defensible. Without it, the deduction claimed by the paying entity is exposed and the arrangement is difficult to explain.

We have years of undocumented balances. Is it too late?

Usually not, though the options narrow with time. Some balances can be documented now, some repaid, and some need relief to be applied for. The first step is mapping what is actually there, because the right fix differs for each year and each entity.

Give each transfer a character before the year ends

Tell us what the group looks like and how money moves inside it. We will tell you what each transfer is, and what it should be.

Inside the group it is housekeeping, to the law it is a transaction

Money moves around your group as it is needed, and it has always worked. The difficulty is that each movement has a tax character whether or not anyone chose one. A loan that was never documented, a distribution recorded but never paid, an expense borne by the wrong entity. Each is fixable while it is recent and awkward once it has been repeated for years.

We will map the group's entities, who controls them, and how funds move between them.
We will give each recurring transfer a character and tell you what it should be.
We will document intercompany funding so that Division 7A is satisfied.
We will put service agreements in place where entities provide services to each other.
We will tell you which existing balances need fixing, and in what order.

The group operates as one and is taxed as several

You have a group that grew rather than being designed. There is a trading company, a trust that holds something, perhaps a property entity and a self managed fund nearby. Cash moves between them as needs arise, and the accountant reconciles it afterwards. You want the flexibility to keep supporting each part of the group, without the transfers creating liabilities nobody intended.

What's included in your group structuring advice

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A map of the group's entities, control and internal money flows.
Characterisation of each recurring transfer between entities.
Division 7A compliant loan documentation.
Trust distribution and unpaid present entitlement review.
Service agreements at a defensible rate.
A prioritised list of the balances that need remediation.

What undocumented support costs when it is examined

The support that moves around a group is usually generous and usually undocumented. Those two facts together are the problem.

A company that funds a related entity or a shareholder without a complying agreement is exposed to Division 7A. The amount can become an unfranked dividend. A trust that resolves to distribute but never pays the money creates an unpaid present entitlement. That has its own consequences where a company is the beneficiary. Expenses borne by an entity that did not incur them are not deductible to it, and may be assessable to whoever actually benefited.

None of this is apparent while things are going well. It becomes apparent during a review, on a sale, or when the group needs to borrow. A lender will ask what the intercompany balances actually are. By then the entries span years, and reconstructing intent from a spreadsheet is much harder than recording it at the time.

From entries in a spreadsheet to arrangements you chose

We map the group as it actually is, including who controls what and how the money has been moving. That map is usually the first time the whole picture has been in one place.

Then we give each recurring movement a character and the documentation to match. Funding between entities becomes a loan on terms, or a distribution, or a payment for services, chosen deliberately rather than assigned afterwards. Where a company is involved, we make sure Division 7A is satisfied. Where services are provided between entities, we put an agreement in place at a defensible rate. The result is a group that can still support its parts, with each transfer doing what you meant it to do.

How we get a group's internal dealings in order

Map the group, then give every transfer a character and a document.

Map the group

We set out the entities, who controls each, and how money has actually been moving between them.

Characterise the flows

We decide what each recurring transfer should be, and tell you where the current treatment will not hold.

Document and remediate

We put the agreements in place, and give you an ordered list of the balances to fix.

Every transfer inside the group given a character

Helping one part of a group out of another is a normal thing to do. It feels like moving your own money between your own pockets. The law’s view is narrower than that, and it is not obvious why until it costs something.

One of our lawyers is a Chartered Tax Advisor with The Tax Institute and has held that credential for 25 years. We are also recognised in Doyle’s Guide for tax law. We advise family and business groups on intercompany funding, Division 7A, trust distributions and service agreements. We work with your accountant on the entries rather than duplicating them. We would rather document an arrangement now than reconstruct it during a review.

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Six principles we hold to, whatever you bring us and however long it takes.

Take the time

We listen carefully to understand what you want to achieve, then step you through the advice and the documents.

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Someone is always available to answer your question or point you the right way.

Fair pricing

A fixed or capped quote for advice and documents, so you do not carry the price risk.

It is your show

We are in it for a front row seat to witness your success, not for our egos.

Get the group's internal dealings documented

Tell us what entities the group has and how money moves between them. We will give each transfer a character, document it, and tell you what to fix first.

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