Shouldering the user uptick after the restructuring storm: ASBFEO

Bracing for an uptick

With small businesses operating through a discretionary trust facing the possibility of needing to restructure, the ombudsman may need to brace for an uptick in small business owners using their services.

“We’ve got our contact centre where people can call us for free advice. It may well be that we see a tick up – an increase in the number of calls that we’re receiving about that.” 

“It’s quite possible that small businesses might find themselves needing our dispute resolution service a bit more.

“We’re definitely ready to assist, and if at some point in time, the demand for our services well exceeds what we can deliver, I’ll make sure I’m having those conversations with government.”

McAlary-Smith said that ASBFEO works in a way that prioritises efficiency of resources.

“We run very efficiently. We are really tight with where we direct our resourcing and try to be as efficient as possible to walk the talk, like what is expected of our small businesses.”

“If the numbers go through the roof, then that will be a conversation that I’ll be actively having with government at the time.”

While it could place a greater burden on the Ombudsman, McAlary-Smith told the brand that there are benefits as well.

“So when we take on additional responsibilities and the like, we all start to proactively do things ourselves, where we think there are opportunities to do greater education work.”

“[This includes] thinking creatively, working in partnership with industry stakeholders, local chambers of commerce, a whole range of different organisations, and talking to the media at times.”

“We will always try and do that within our existing envelope, because that is exactly what is being asked of small businesses.”

Action or no action

Despite the likelihood of a restructure, she told the brand that it is crucial to hold back from taking any action.

“We will only know what the discretionary trust changes are in a finalised way once they have made it through the passage of Parliament.”

“Even choosing not to do anything is a decision in and of itself”

In the ombudsman’s July submission on the minimum tax on discretionary trusts draft legislation, it pointed out crucial changes for the benefit of small businesses.

“You’ll have seen in our submission – we’ve done a list of various things which businesses would need to change. One thing that’s very important that businesses keep in mind is that in the vast majority of cases – particularly contractual arrangements – the trustee doesn’t have a unilateral right to change the entity on that contractual arrangement when they’re moving to another corporate entity.”

The submission also stressed the advisory and compliance costs of restructuring, along with the difficulty of changing entities.

“For many small businesses, changing from a long-established discretionary trust structure to another legal entity and structure would involve considerably more than a simple change in tax treatment,” ASBFEO’s submission said.

“The process would require extensive legal, tax, accounting and commercial analysis to determine the most appropriate restructuring approach and to identify the consequences of transferring business activities, assets and liabilities,” it said.

Educative role

McAlary-Smith said that from early next year, ASBFEO was tasked with providing information and education for small businesses running out of this trust structure.

“We have an educative role from January next year. We have been asked to provide information and education to small businesses who are operating in the discretionary trust environment.”

“That is one thing we’ll be doing – taking on that work to provide very high-level information and connecting in with ASIC and ACCC in the right situation around other options of entities, and if you want to incorporate, these are the things you need to factor in.”

She noted the ASBFEO’s subsidised mediation models which can save small business owners significant amounts.

“For the dispute resolution service, we have introduced a subsidised mediation model. Where we would make a decision that we think mediation would be of great value to both parties, and both parties agree, ASBFEO is now providing mediation at the cost of $250 per party for a half-day mediation; if it’s a full day, it’s doubled that; and we are subsidising the rest as part of our efforts to make dispute resolution as accessible and inclusive as possible to our small businesses,” she said about ASBFEO’s dispute resolution service.

“Paying $8,000 for a mediation is usually well beyond the reach of our small businesses,” McAlary-Smith said.