How Small Business CGT Concessions Can Save Tax and Boost Superannuation

As a small business owner, you’ve likely invested heavily in your business, often at the expense of making personal superannuation contributions. The good news is that the small business CGT concessions may offer an opportunity for you to reduce Capital Gains Tax (CGT) and catch up on your superannuation contributions.

What are the Small Business CGT Concessions?

These concessions are designed to help small business owners who sell their business to reduce or eliminate the CGT on the sale. They also allow business owners to contribute the proceeds from the sale to their superannuation, potentially boosting their retirement savings.

Assessing whether a business meets the eligibility criteria for CGT concessions can be complex, as it depends on your business structure and any linked entities.

Broadly speaking, four possible CGT exemptions are available, each with specific conditions:

1. 15-Year Exemption: This exemption allows you to eliminate 100% of your capital gain from CGT, provided you have owned the business for at least 15 years.

2. Small Business 50% Active Asset Reduction: This concession reduces your capital gain by 50%. It can be used in conjunction with the general 50% CGT discount (for individuals), the retirement exemption, and small business rollover relief.

3. Retirement Exemption: Under this exemption, you can disregard up to $500,000 of capital gains over your lifetime. If you are under 55 years old, the exempt capital gain must be contributed to a complying superannuation fund or retirement savings account (RSA). If you are over 55, there is no requirement to contribute the amount to superannuation. Importantly, you do not need to retire to utilise this exemption.

4. Small Business Rollover Relief: This allows you to defer all or part of your capital gain for up to two years. If you do not acquire a replacement asset within two years, the deferred capital gain will be taxed.

There is also the small business rollover, which can defer CGT when selling an active asset that is being replaced for business use. However, this is typically not relevant if you are exiting the business.

For the Best Outcomes, You Need Professional Advice

Determining your eligibility for CGT concessions can be complex. While an accountant is best qualified to assess your eligibility and determine which exemptions may suit your circumstances, involving your financial adviser could also be beneficial. Your financial adviser can assist in planning how the sale proceeds might be contributed to your superannuation.

If you have sold or are planning to sell your business in the future, it is important to understand how the CGT concessions could apply to you. Being aware of the eligibility conditions is crucial to avoid inadvertently disqualifying yourself from these potential benefits.

With the right advice and early planning, you can save on taxes and build your superannuation, ensuring a comfortable retirement.

 If you’d like to know more, please contact me.

Moiler Wealth helps high net wealth individuals and family groups, professionals, business owners and pre-retirees to live life, your way!

Learn more about Adam here.

Read more in our CGT case study here.

Disclaimer: The advice provided here is general in nature only as, in preparing it we did not take account of your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should consider the relevant Product Disclosure Statement before making any decision relating to a financial product

Ian Moiler Pty Ltd (Moiler Wealth) is an authorised representative of Count Financial Limited ABN 19 001 974 625 holder of Australian financial services licence number 227232 (“Count”). Count is owned by Count Limited ABN 111 26 990 832 of GPO Box 1453, Sydney NSW 2001. Count Limited is listed on the Australian Stock Exchange.

Further reading: Small Business CGT Concessions ATO

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