Making the most of small business CGT Concessions

March 2015

If you're thinking about selling your business, it's worthwhile consider whether you may be able to apply for small business CGT concessions.

There are four small business tax concessions that can be utilised to reduce the capital gain on business asset so long as you meet certain conditions:
  • 15 year exemption
  • 50% asset reduction
  • Retirement exemption
  • Small business rollover
These concessions apply to businesses with an annual aggregated turnover of less than $2 million or can apply to taxpayers or business that meet the Maximum Net Asset Value Test (with net assets of $6 million or less).  Many rules, see Glenn's comments

How do the small business concessions work?

The four capital gains exemptions include:

The Small business 15 year exemption which allows for no assessable capital gain on a business owned for 15 years, you're 55 years old and retiring. If you've been permanently incapacitated, this exemption may also apply.

The Small business 50% active asset reduction which you can choose to reduce your capital gain by 50% on the sale of a business asset. This can also be applied in conjunction with other benefits concurrently. 

Small business retirement exemption which allows you to exempt the capital gain from the sale of a business asset up to a lifetime limit of $500,000 if you're 55 or older. If you're under 55, you must pay the exempt amount into a complying superannuation fund or retirement savings account. Using the right structures in family situations can double the benefit of this concession. 

Small business rollover if you sell an asset and use the proceeds to by a new active asset or improve the condition of an existing one, then CGT can be deferred to the sale of the new one.

Many of the concessions mentioned above can be used in combination and can have a dramatic effect on reducing tax from the sale of your business. 

These are powerful concessions. For example, the active asset reduction reduces the gains and the business rollover will delay the remaining gain for two years. Then, if no replacement asset can be found, the requirement exemption allows you to put the remaining taxable gain in to super, tax-free. 

Talk to your accountant

It is worth the time to discuss your capital gains options with your accountant to make sure you're able to maximise your access to the concessions. Contact us on 02 9957 4033. 

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This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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