Tag: business

Family Office Vlog Series: Ep. 2 – What is a Multi-Family Office?

Posted on by Peter Harper

Learn why family clients are looking to start a multi-family office in our second episode of the Family Office Vlog Series with Asena CEO Peter Harper.

Transcript:

Peter Harper: Hey, guys. Peter Harper, Managing Director and CEO of Asena Family Office. For those of you who are not familiar with our business, we advise foreign families and private clients on U.S. direct investments in mergers and acquisitions.

Peter Harper: So today, I wanted to talk about the definition of a multi-family office (and) what is it? The term “family office” has become more ubiquitous over the last decade as the transference of money, of significant private money, away from major institutions into the hands of private family managers continues to grow. So in my last video where I talked about what it was to be a family office, right, a multi-family office is just that on a fractional basis.

So, to recap, in a typical family office, (especially a) single family office, you’ll have a C suite. Not unlike you would have in an operational business that covers tax, accounting, finance, and legal wealth management, investments, (and so on). So (then) general admin for the family.

Peter Harper: In a multi-family office, it’s simply that on a fractional basis. A family may not have the wealth to be able to sustain the full C suite. And for a lot of single family offices, it can cost $3 to $10 million just to run the executive infrastructure for the family.

Peter Harper: So they may not have the wealth that can sustain that type of costs or to run it. So they say, “We want someone on an outsource basis to fractually manage all these things for us as a family.” Right? Obviously, when you’re doing it fractual, there’s going to be some reduction in the cost for doing that, or they simply don’t want the headache of managing all those people internally.

Peter Harper: So this is the core of what Asena as a business does. We provide fractional support for families that either choose not to run their own C-suite or run their own service lines because they don’t have the wealth to sustain that or because they don’t want the headache of that. And we do that across tax, accounting, estate planning, wealth management, M&A advisory, and legal.

Peter Harper: So if you want to know more about family offices or you need help with your family office, please reach out.

Peter Harper: Cheers.

 

Want to start your multi-family office? Stay tuned for more expert tips or get in touch with one of our Asena consultants to get started.

–Peter Harper

Family Office Vlog Series: Ep. 1 – Intro to Family Offices

Posted on by Peter Harper

In the premiere episode of our new Family Office Vlog Series, Peter Harper (CEO and Managing Director) will introduce us into what a family office is and why it is vital for private clients looking to secure the management and legacy of their wealth.

Transcript:

Peter Harper: Hey, guys. (This is) Peter Harper, Managing Director and CEO of the Asena Family Office. For those of you who are not familiar with the business or a multi-family office, we advise foreign family offices and private clients on US direct deals and mergers and acquisitions.

Peter Harper: So today, I wanted to just touch on the definition of a family office. And the reason why I wanted to revisit this is (that) recently, I was on a call with another advisor. The opportunity was referred to through me from one of the top US private banks, you know, (as) we get a bunch of referrals from banking referral partners. And the question was posed quite cynically, I might add, is, “What is a family office anyway?” Right? 

Peter Harper: And I think whenever I hear that question, my immediate reaction is that the person I’m speaking to is kind of threatened by or has had no meaningful interaction with the family office to truly understand what it means to be one, right? And there are multiple facets as to what one means today.

Peter Harper: And the two more important things (are as followed): the first, which is probably more obvious for a lot of folks, is an individual who’s had material success needs a team of people to drive their private investments; (overall), to manage and drive their private investments. So what that looks like is how you would approach a normal business: you’d have a C-suite, a team of people across tax accounting, legal investments, (and) people management to go off and execute on the founder or family success, right? So the normal sort of economic business apparatus to drive the family forward.

Peter Harper: But in my opinion, the most integral piece, right, because in that same question, “What is a family office?”, you know, (conjures the image of) a traditional trusted advisor who is sitting next to a patriarch or an individual. So that one person would say, “Well, all that individual needs is a good advisor, one person to help them drive that forward.”

Peter Harper: The thing that that person’s missing is that without the right framework for a family office apparatus, (then) we feel it’s almost guaranteed that the family money is going to be dispersed on the demise of that individual, right? And the reason for that is there is no family buy-in for future generations to actually help the founder or the patriarch/matriarch build a long-term legacy.

Peter Harper: So, in my opinion, the single most important thing that defines a family office is how they think about legacy, how they think about the concentration and management and value of wealth across multiple generations. So across 100 to 200 years, right?

Peter Harper: And the only way that families can sustain a family office for a long period of time is if future generations care about things other than just money. They care about the family, and they understand why it’s important to keep the family together and flourish and grow as a family. 

Peter Harper: Cheers, guys.

 

Want to learn more? Follow us same time next week for our next episode, sign up for our newsletter for updates, or schedule your consultation with one of our advisors.

–Peter Harper

US-AU DTA: Article 13 – Alienation of Property

Posted on by Peter Harper

INTRODUCTION

When it comes to the alienation of property, it is usually standard practice to give the taxing rights to the state which, under the DTA, is entitled to tax both the property and income derived from it. 

Article 13 provides rules for the taxation of certain gains derived by a resident of a Contracting State. In general, the Article makes provision for the following: 

  1. gains from the alienation of real property may be taxed where the real property is located;
  2. gains derived from the alienation of ships or aircraft or related property may be taxed only by the State of which the enterprise is a resident, except to the extent that the enterprise has been allowed depreciation of the property in computing taxable income in the other State; and
  3. gains from the alienation of property referred to in paragraph 4 (c) of Article 12 (Royalties) are taxable under Article 12. 

Gains with respect to any other property are covered by Article 21 (Income Not Expressly Mentioned), which provides that gains effectively connected with a permanent establishment are taxable where the permanent establishment is located, in accordance with Article 7 (Business Profits), and that other gains may be taxed by both the State of source of the gain and the State of residence of the owner. Double taxation is avoided under the provisions of Article 22 (Relief from Double Taxation).

INTERPRETING ARTICLE 13 OF THE DTA – ALIENATION OF PROPERTY 

Article 13(1) states that income or gains derived by a resident of one country from the alienation of real property in the other country may be taxed in that other country.

For example, if a US resident derived income or gains from the disposal of real property located in Australia, that income or gain may be taxed in Australia.

The meaning of the phrase ‘income or gains’ was clarified by the Protocol. Article 2(1)(b) (Taxes Covered) was amended to include a specific reference to Australian capital gains tax to ensure that capital gains are within the scope of the DTA. 

Article 13(2) defines the term ‘real property’.

For purposes of the US, Article 13(2)(a) provides that the term ‘real property situated in the other Contracting State’ includes a ‘United States real property interest and real property referred to in Article 6 which is situated in the United States’. 

Accordingly, the US retains its full taxing rights under its domestic law.

For purposes of Australia Art 13(2)(b) provides that real property includes the following:

  1. real property referred to in Article 6;
  2. shares or comparable interests in a company, the assets of which consist of wholly or principally of real property situated in Australia, and
  3. an interest in a partnership, trust or estate of a deceased individual, the assets of which consist wholly or principally of real property situated in Australia.

Article 6 includes within the definition of real property a leasehold interest in land and rights to exploit or to explore for natural resources.

Shares or comparable interests in a company, the assets of which consist wholly or principally of real property, and an interest in a partnership, trust or deceased estate are also deemed to be real property in terms of Article 13(2)(b)(ii) and 13(2)(b)(iii).

Article 13(3) states that income or gains arising from the alienation of property (other than real property covered by Article 13(1)) forming part of the business assets of a permanent establishment of an enterprise or pertaining to a fixed base used for performing independent personal services may be taxed in that other state. 

This article also applies where the permanent establishment itself (alone or with the whole enterprise) or the fixed base is alienated and corresponds to the rules for the taxation of business profits and income from independent services in Article 7 and Article 14 respectively. 

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Article 13(4) makes provision for exclusive taxing rights of income and capital gains by the residence country from the alienation of ships, aircraft or containers operated or used in international traffic. It is also important to note, that this applies even if the income is attributable to a permanent establishment maintained by the enterprise in the other Contracting State.

Article 13(5) applies to the taxation of deemed disposals when ceasing your tax residency in a contracting state. This is also referred to as an exit tax. This article states that where an individual, has a deemed disposal event in their residence state due to ceasing residency, they can elect to be treated for the purposes of the taxation laws of the other state as having alienated and re -acquired the property for an amount equal to its fair market value at that time.

This rule has two significant consequences –

  • Firstly, if the individual is subject to tax in the other Contracting State on the gain from the deemed sale of the asset a foreign tax credit for tax on the deemed sale will be available pursuant to Article 22.
  • Secondly, the deemed sale and repurchase will result in the individual resident in the other Contracting State having a “stepped up” cost base equal to the fair market value of the property.

Article 13(6) states that where a resident of one state elects to defer taxation on income or gains relating to property that would otherwise be taxed in that state (upon ceasing to be a resident) only the state where they subsequently become a resident can tax the deferred gain. 

Article 13(7) makes provision for any other capital gains not covered by Article 13. These capital gains are to be taxed in accordance with the domestic laws of each country.

Article 13(8) lastly clarifies the taxation of real property which consists of shares in a company or interests in a partnership, estate or trust as referred to in Article 13(2)(b) is deemed to be situated in Australia.

CONCLUSION 

There have been numerous disputes regarding the application of this Article and reference to case law is extremely important. Especially in relation to limited partnerships and or indirect ownership through a chain of companies of Australian real property.

Make sure you understand how Article 13 can impact your potential liquidity event when planning to dispose of your business.  

We strongly recommend seeking professional advice when it comes to this Article and our team of International Tax specialists at Asena Advisors, will guide you on how to approach and interpret Article 13. 

We strongly recommend seeking professional advice when it comes to Article 12. As always, our team of International Tax specialists at Asena Advisors will guide you on how to approach and interpret Article 12. 

Shaun Eastman

Peter Harper