Don’t Lose Your House While Building Other People’s

Structuring your business to protect your family home is vital for your peace of mind.

Up to eight in 10 business owners are at risk of losing their family home in the event of a professional catastrophe and for those in the building trade, the risk could be even higher.

Under QBCC regulations, builders can be at risk as an individual if things go wrong. That’s why structuring your business is so important.

> visit our QBCC MFR Report & Accounting page to learn more about managing your QBCC obligations. <<

Single Director Structure is Ideal

Here at Xact Accounting we often see builders and tradies operating their business under a dual directorship with their spouse.

“And to further complicate matters, both parties often sit on the title of the family home,” building industry accounting expert Mick Renton said.

“Having a single company director is the recommended approach.”

Risk Taker and Asset Holder

Mick advises appointing one person as the “risk taker” who also becomes the director and the other person as the “asset holder”.

For already established dual-director businesses, removing one of the directors is a relatively straightforward process,” he said.

To protect the house, the risk taker can gift his or her share of the house to the asset holder. Whilst this is fairly simple it attracts stamp duty so can be expensive. A more cost-effective option is to set up a trust for the risk takers share of the house, which then mortgages their equity back to the asset holder.

Read more about asset protection in Mick’s article in Master Builders Magazine.

When to Consider Reviewing Your Asset Protection Strategy

The ideal time to sort out your business structure is now!

“A lot of people don’t want to confront this issue, but it’s hard to undo when everything is in joint names and it can get expensive,” Mick said.

“If you confront these issues early, it’s relatively inexpensive. Asset protection is all about planning for the worst while hoping for the best.

“Building is a risky sector and if you do come unstuck, it’s likely you will go bankrupt. Get peace of mind by structuring your business accordingly.

“Many small businesses make errors when they set up, so it is better to get it right at the start, and while a little more complicated, it can still be fixed once established,” Mick said.

“Keeping the family home out of reach of creditors is a legitimate way to structure your affairs and one that all hard-working business people should consider.”

Keeping the Family Home in Bankruptcy

At Xact, we’ve helped countless business owners to hang on to their family homes when the worst happens.

Mick recalls one case where his client was nearing retirement, having worked in the industry for over 40 years. When a large contract fell over and triggered bankruptcy, the client was able to keep his family home because it was in his wife’s name as the “asset holder”. Unfortunately, this is the exception, not the rule.

If you end up bankrupt you could lose everything that you have worked for – I’ve seen it happen and it really takes people to the edge.

No one wants this outcome and it’s something that is easily avoided.

We also recommend you make sure all your professional insurance is in order, and that you’re contributing to your superannuation. Super is a protected asset in bankruptcy, so can’t be touched by creditors.

Xact Accounting’s top tips for protecting your assets:

1. Decide who is the asset holder and who is the risk taker.
2. Select the right structure for your business – single director companies, or having a Trust in place are the best options.
3. Understand your financial position at all times. Know your margins before taking on a project.
4. Ensure you have the correct insurance.
5. Talk to your accountant about using superannuation to your benefit.

Xact Accounting can offer you a free comprehensive consultation to assess your risk and explore the best way to structure your business.

Also…. Read more about Asset protection in Mick’s article in Master Builders Magazine.