By Bjorn Kirberg
Small business owners who sell business assets may be eligible for tax concessions on capital gains and may be able to contribute an amount into superannuation to help fund their retirement.
Eligibility requirements include:
• Net value of assets owned by your business and related entities is below $6 million or aggregated turnover of your business is less than $2 million.
• The business/asset being sold must be an active asset (not passive).
• Additional rules apply if the asset being sold are shares in a company or an interest in a trust.
Once the eligibility requirements are met, the following concessions may be available:
•15-year exemption – 100% tax free is owned more than 15 years and the owner is over 55 and retiring
•Small business 50% active asset reduction – provides a 50% reduction on the capital gain (in addition to the general 50% discount).
•Retirement exemption – Up to $500,000 (lifetime limit) can reduce the capital gain. If under 55, this amount must be contributed into superannuation.
•Small business rollover relief – Allows a replacement business to be purchased in order to defer the capital gain until that business is sold in the future.
These rules appear simple in concept however are extremely complex. If the eligibility conditions aren’t met, the tax consequences could be disastrous.
In the next several episodes, we will delve deeper and explore each of the aspects in more detail.