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The Small Business CGT Concession Explained  

by Susan Edevane

2 min read

As a small business owner, you can qualify for several capital gains tax (CGT) concessions when selling business assets. This means that if you need to dispose of assets that have risen in value during the time you’ve owned them, you may not have to pay capital gains tax on the profit you make from their sale.

So what’s available, and how do you qualify for them? The Australian Taxation Office (ATO) has three basic criteria, and you only need to satisfy one:

  • You’re a small business, defined as having an aggregated annual turnover of less than $2 million
  • Your net assets don’t exceed $6 million (excluding personal assets such as your family home)
  • Your asset was used in a closely connected small business

Concessions You Might Qualify For:

15-year Exemption

If your business has owned an active asset for 15 years, and you’re over 55 and retiring or permanently incapacitated, you can sell the asset without being assessed for capital gains. To be defined as “active”, the asset must have been used in your business for at least half the period of its ownership.

You do need to make a “declaration of retirement” for this benefit, but the ATO still allows you to do some ongoing work, such as consultancy. So long as there is a significant change in your work patterns, it will regard you as retired.

50% Asset Reduction

This allows you to reduce the capital gains on an active asset by 50%. If you’ve owned that asset for at least 12 months, you can also get the 50% CGT discount.

Retirement Exemption

Capital gains from the sales of active assets are only exempt up to a lifetime limit of $500,000. If you’re under 55, you need to pay the exempt amount into a super fund or retirement savings account.

Note that you don’t have to wind up your business at the same time – the aim is to help you provide for your retirement later on.

Rollover

If you sell an active asset, you can defer all or part of a capital gain for two years. You can defer even longer if you then acquire a replacement asset, or if you spend money to improve an existing asset, such as renovating an investment property.

As you can see, many of these concessions are aimed at helping Australians boost their retirement savings. It’s a good idea to consult your accountant or financial planner to determine the best time to offload assets, based on your age and when you plan to retire. If you’re interested in learning more about CGT concessions and how you could qualify for one head to the ATO website or Business.gov.au.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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