Australian small business CGT concessions: A simple overview
If you’re a small business owner in Australia, you may be entitled to a number of capital gains tax (CGT) concessions. These concessions can help you to reduce or defer the amount of CGT you pay when you sell your business or business assets.
What are the different small business CGT concessions?
There are four main small business CGT concessions:
- 15-year retirement exemption: This concession allows you to exempt a capital gain from a small business asset if you are 55 years old or older and have owned the asset for at least 15 years.
- 50% active asset reduction: This concession reduces the capital gain on an active business asset by 50%.
- Small business retirement exemption: This concession allows you to contribute remaining capital gains to super tax free, or if you are over 55, take the funds personally, tax free.
- Small business rollover: This concession allows you to defer a capital gain on an active business asset if you reinvest the proceeds from the sale of the asset into another active business asset.
Depending on the structure you own the business in you may also be able to claim the general 50% CGT Discount, before applying the above concessions. Expert advice is essential to ensure you optimise the order in which you use these concessions.
Who is eligible for the small business CGT concessions?
To be eligible for the small business CGT concessions, you must meet the following criteria:
- You must be a small business entity. This means that your aggregated turnover for the year must be less than $2 million.
- You must own the asset for which you are claiming the concession.
- The asset must be an active business asset. This means that the asset must be used in your business to generate income.
- Different rules apply depending on what structure you own your business within. Concessions apply to sole traders, partnerships, trusts and companies.
How do I claim the small business CGT concessions?
To claim a small business CGT concession, you are best to consult with an Accountant who is experienced in dealing with this complex set of concessions. At Wood Accounting we have many years of experience assisting clients maximise their benefits, and minimise any Capital Gains Tax. You may also need to provide additional information to the Australian Taxation Office (ATO), such as a valuation of the asset.
When should I speak to an accountant about the small business CGT concessions?
If you are thinking of selling your business or business assets, it is important to speak to an accountant to discuss your eligibility for the small business CGT concessions. An accountant can help you to calculate your potential CGT liability and advise you on the best way to structure your sale to minimise your tax.
If you are a small business owner in Australia and you are thinking of selling your business or business assets, speak to our experts at Wood Accounting for advice on how to minimise or eliminate your tax liability. Wood Accounting has a team of experienced accountants who can help you to understand the small business CGT concessions and ensure that you claim all of the concessions to which you are entitled.