ON A SUPERFICIAL level, Rupert Murdoch might look like he has an enviable life but if I were asked to put my hand up to swap places with him, I would keep my arms fastened to my side.
And this isn’t due to his billionaire status (obviously), his conservative political views or the fact that he’s had more marriages than I’ve had cars.
It’s because of the massive headache he is enduring due to the succession planning issues that are currently playing out in a small courtroom in Reno, Nevada. Murdoch had set up a trust for the benefit of four of his six children and now wants to make changes to give full control to his son Lachlan rather than his four eldest kids share control equally.
But this seemingly simple change is not as easy as it might seem. In fact, real life is becoming just as complicated as the hugely popular TV series Succession, which is said to have been inspired by the Murdochs.
In my role, I unfortunately see many family disputes when it comes to succession planning and see people face hefty tax bills due to poor or no planning. It might not involve as much as the €17.9 billion family trust that the Murdochs are battling over, but these things are all relative.
Through our work, we try to avoid family disputes and potentially avoidable tax liabilities by offering bespoke planning services to meet a person’s individual needs. As Benjamin Franklin or Roy Keane might say, ‘Fail to Prepare, Prepare to Fail’.
When you are mapping out the when, who and how around your succession planning, you need to keep yourself up to date on the laws around this area to ensure that you are making the right decisions for you and your family’s future.
And many of these rules are expected to change in the near future – some as a result of Budget 2025. With the budget fast approaching tomorrow, let’s take a look at four potential changes expected to be rolled out and how they will affect your succession planning:
Inheritance Tax Threshold
Currently, if you inherit assets from your parents you can receive up to €335,000 tax-free, anything in excess of this is liable to Capital Acquisitions Tax at 33%.
In Budget 2025, we expect this threshold to increase to €400,000 giving those pesky kids an additional €65,000 tax free. This is a welcome increase considering rising inflation and the fact property prices have increased significantly in the past 10 years.
It is worth noting though that back in 2009 this limit was €542,000, meaning there is still potential scope for increase in the coming years.
Employer Contributions to PRSA
In the 2022 Finance Act, the Benefits in kind (BIK) charge on employer contributions was removed. This allowed employers to make large contributions to Personal Retirement Savings Accounts (PRSAs) without the same funding restrictions that applied to traditional occupational schemes.
This was a hugely beneficial change for company directors and key employees to make significant contributions to their pension fund. It seemed too good to be true, and it looks like that is the case, as Revenue is believed to be actively reviewing it. We therefore expect that there will be changes to this to closely align it with traditional occupational schemes.
Where’s the opportunity, you ask? Well, if you have a business then you should look to take advantage of this prior to the end of 2024 and make contributions where the cashflow in the business allows.
While many will be dealing with rising costs and inflation, it is so important to plan for your retirement and a key part of succession planning is ensuring you have adequate funds to replace your income post-working life.
Standard Fund Threshold
As it stands, high earners in this country can have up to €2 million in the maximum tax-efficient fund in Ireland, known as the Standard Fund Threshold. This fund is going to increase to €2.8 million over four years beginning in 2026.
If you have been lucky or good enough to fund your pension to this limit, well then, the maximum lifetime tax-efficient sum you can take is €500,000. A total of €200,000 is available tax-free and the remainder €300,000 is taxable at 20%, the lower rate of income tax.
But what’s important once you extract the maximum amount in a tax-efficient way? Planning what to do with your funds is a key part of succession, maybe you want to invest and generate a return on the money, or maybe you want to travel the world. Either way, having a plan and matching it to your financial and life goals is key.
Retirement Relief Changes
Although already announced in a previous Finance Bill, changes to Retirement Relief will be coming into effect on 1 January, 2025. Retirement Relief is a relief from Capital Gains Tax for business owners who are disposing of their business to a third party or for those who are passing on their business to the next generation.
Subject to meeting the necessary conditions, you could essentially pay no tax compared to 33% Capital Gains Tax.
For example, if you are selling your business to a third party, you can sell the business for up to €750,000 between the age of 55-69 and pay 0% CGT. The limit reduces to €500, 000 when you turn 70. This encourages early transfer of the business and a key part of the succession, which is ensuring the long-term future of the business.
Are you keeping the business in the family? If it’s going to the next generation, you can pass a business worth up to €10 million between the ages of 55-69 with no CGT being payable. This limit reduces to €3 million once you hit 70, so again there is a real incentive to plan this succession prior to when you hit 70.
There has been quite an amount of industry noise regarding the passing on of a family business and I expect in Budget 2025 tomorrow we may see a change to the €10 million limit or even a complete removal of the limit.
Family businesses might not all be the size of the Murdoch empire, but they are the lifeblood of the Irish economy and where the trade is going to be continued within the family, they should not suffer CGT on this transaction.
So, on the face of it, this budget and the changes planned could benefit those looking to plan the succession of their wealth, but it is likely not enough for some who will feel that more should be done. And with an impending election likely, wait for the political point scoring to start!
David Quinn is Head of Business Growth at business advisory firm Nexiō.
To embed this post, copy the code below on your site
have your say