The Small Business CGT Concessions is important to know so as to not pay more tax than what is payable / required. Small businesses are facing a set of challenges again that can make fulfilling tax obligations seem like a daunting task. However, as a small business, capital gains tax concessions on assets used to conduct your business may be of interest. These assets are known as “active assets” and can, for example, be tangible assets or intangible assets (such as goodwill).
The turnover threshold for such CGT concessions is $2 million, according to the ATO. If your turnover is more than $2 million, then you need to satisfy an assets test.
There are stringent eligibility requirements and conditions that you must meet to access these concessions.
If you have owned an active business asset, you may only be required to pay tax on 25% of the capital gain.
Example – Over 55
Suppose you are 55 years of age or older and are retiring or are permanently incapacitated (and have owned an active business asset for at least 15 years). In that case, you may not have to pay any CGT when disposing of an asset by sale, gift or transfer. You might also be able to contribute the amount that you make from this exemption to your super fund without affecting your non-concessional contributions limits (you can speak with us about this if you are unsure about this process).
Example – Under 55
An option is available to pay the taxable 25% of the disposal proceeds into a complying fund or RSA. There is then a full CGT exemption on the sale of an active business asset of up to $500,000. The exemption to CGT does not impact your non-concessional contributions limits.
Disposing of an active asset, but you will buy a replacement asset or improve on an existing one? You can defer your capital gain in this instance until a later year. You can acquire the asset one year before or two years after the last CGT event.
Share/Interest In Another Entity
There will be additional conditions if the asset is a share in a company or an interest in a trust. There are other CGT exemptions, rollovers and concessions specific to small businesses that you may access. These small business CGT concessions will reduce the taxable capital gain and, in some cases, result in no tax.
Speak with us to determine what you may be entitled to when it comes to CGT and your business to ensure that you are doing the right thing with your tax obligations after selling an asset.
