Understanding the intricacies of taxation can be a daunting task, especially when it comes to the Small Business Capital Gains Tax(CGT) Concessions. These concessions can have a significant impact on the tax outcome of your business or the sale of a CGT business asset.
Thankfully, there’s not too many variables to wade through, as Australia offers four types of CGT concessions. Having said that, determining which one applies to your specific situation can be a complex process that mean it’s worthwhile enlisting the help of the Attune team so you can ensure you take the right path.
To help you start the process, let's take a closer look at the four CGT concessions available:
- 15-year Exemption: If you're 55 years or older and either retiring or permanently incapacitated, the 15-year exemption may provide total relief from CGT when you sell a business asset. To qualify for this exemption, you must have owned the asset for at least 15 years, with at least 7.5 of those years being classified as an active asset. This concession allows you to disregard the entire capital gain from the sale.
- 50% Active Asset Reduction: The 50%active asset reduction concession offers a 50% reduction of the capital gain made on the sale of an active asset. An active asset refers to an asset that is used or held ready for use while running your business. This concession is often combined with other concessions to achieve greater CGT relief.
- Retirement Exemption: The retirement exemption provides relief up to a lifetime limit of $500,000. If you're under55, the exempted amount must be paid into a complying superannuation fund or aRetirement Savings Account (RSA). However, if you're 55 years or older, there is no requirement to contribute to a complying superannuation fund or RSA.
- Rollover Concession: The rollover concession allows you to defer your CGT liability when you sell an active asset and buy a replacement active asset within two years before or one year after the original CGT event. The CGT liability is deferred until the replacement asset is sold.
Two of the most frequently asked questions about SmallBusiness CGT Concessions:
- Can I use more than one CGT concession? Yes, certain concessions can be applied in conjunction with others, depending on your specific circumstances.
- Can these concessions apply to a pre-CGT asset? No, the CGT concessions only apply to CGT events, and pre-CGT assets are excluded from CGT events.
Remember, the complex world of Small Business Capital Gains Tax doesn't have to be overwhelming. With the right assistance, you can navigate it successfully, protecting your financial interests while ensuring full compliance with the Australian Tax Office requirements. Your focus should be on growing your business, and ours is to support you in doing so.
So what’s my next move?
Understanding these CGT concessions – even at the top level– and their applicability is crucial for effective tax planning strategies, so we suggest at least re-reading the above to get you across them to start with.But remember, at Attune Advisory, we're here to guide you through this process from start to finish – our expert team can provide you with personalised advice tailored to your unique situation, ensuring you maximise the benefits from theCGT concessions available to you.
You can book an appointment to discuss your current situation and how we can help you reach your goals via email or call us at1300 866 113.
