Are you selling your small business?
You may qualify for a range of capital gains tax concessions. These capital gains tax (CGT) concessions help you reduce the taxable capital gain associated with the sale.
What does this mean? It could mean more money for you.
Let’s take a look at the criteria that could get you eligible for CGT concessions.
How can you get capital gains tax concessions?
You can access a CGT concession when selling your business if you meet the following criteria:
- You are a small business entity
- You hold an asset for use by an affiliated or connected small business entity
- You have net assets less than $6 million (excluding personal use assets such as your home – unless it has been used to generate income)
- The asset is an active asset (held for use in a business)
[ctt template=”7″ link=”CDBmk” via=”yes” ]Tip: You can access a CGT concession if you’re selling your shares in a company or units in a trust- although there are extra requirements for which you need to qualify.[/ctt]
Let’s say you’ve owned an active business for 15 years and now you’re retiring. When you decide to sell your business, you won’t have an assessable capital gain.
This financial year the income from the sale of your business may be added to your super and be exempt from the concessional and non-concessional contributions cap up to the $1.415 million lifetime CGT cap, which is indexed.
In other words, the 15-year exemption identifies the sale of your business as part of your overall retirement plan.
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50% reduction on the taxable capital gain
You can have the option to reduce your taxable capital gain on your business by 50%. If you’ve owned your active asset for more than 12 months, you can also benefit from a 50% CGT discount.
By applying for both these reductions, you can reduce the taxable capital gain of your asset sale by up to 75%.
When selling your small business, you may qualify for a retirement exemption. This means capital gains from your sale may be exempt up to a $500,000 lifetime limit.
There are a few conditions you need to meet, depending on your circumstances:
- If you’re under 55 years of age, the exempt amount must be paid into a complying super fund or a retirement savings account. This contribution to super is exempt from the concessional and non-concessional contributions cap. This counts towards the $1.415 million lifetime CGT cap.
- If you’re over 55 years of age, the ‘forced contribution rule’ does not apply nor are you obliged to retire from the workforce.
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The small business rollover
This exemption can delay the tax payable on the capital gain. It also allows a two-year period to get a replacement asset. If you do acquire a replacement asset, the small business rollover exemption reduces the purchase cost for CGT purposes.
Thinking of selling your small business? The following points may affect the CGT concessions available to you:
- Your age
- The ownership structure of the active asset
- The application of the net proceeds, including potentially superannuation options
- Consideration of future active assets and timing
- Timing of other CGT events, losses or gains
- Other income and timing of this income
When you decide to sell your business, it’s important to know the tax exemptions options available to you.
Get the best financial advice you can. A financial adviser can help you align your financial strategies with your financial objectives while minimising the risks.
Here at Shuriken Consulting, I can assist you in deciding on the best financial options to achieve your financial goals and objectives. Get in touch with me now.