Decoding CGT Concessions: A Guide to Selling Shares in a Company or Interest in a Trust

As a business owner, you are well aware of the myriad decisions that demand your attention on a daily basis. Among these crucial choices is the potential sale of shares in your company or your interest in a trust. However, comprehending the taxation implications, particularly the Capital Gains Tax (CGT) concessions related to this kind of thing, can feel like a daunting task.

Fret not, the Attune Advisory team is here to assist you through this process with tailored guidance to provide complete clarity.

With that in mind, we thought we’d put together a top level overview of CGT concessions in this scenario to help you get a quick grasp if you’re in a situation where this could affect you or your business…

CGT Concessions for Selling Shares or Trust Interest:

When you decide to sell shares in a company or interest in a trust, you may be eligible for SmallBusiness CGT Concessions, potentially resulting in significant tax savings during the transaction. While the rules and conditions can be intricate, understanding them ensures you make informed decisions and, potentially, maximise your financial outcomes.

EligibilityCriteria:

‍Accessing theSmall Business CGT Concessions when selling shares or trust interest hinges on two tests:

1. TheMaximum Net Asset Value Test (MNAV) stipulates that the net assets of the entity selling the shares or trust interest, including connected entities, must not exceed $6 million just before the CGT event. And;
2. TheSignificant Individual Test requires that the person selling the shares or trust interest, along with their associates, must have at least a 20% direct or indirect small business participation percentage in the company or trust whose shares or interest are being sold.

 + The ActiveAsset Test:

In addition to the above tests, the company or trust must satisfy the active asset test. This test essentially requires that at least 80% of the assets in the company or trust(by market value) are used in the course of carrying on a business.

‍FAQs on SellingShares or Trust Interest:

What if I don’t pass the Significant Individual Test? If you don't meet the criteria for the Significant Individual Test, there is still an alternative. You can satisfy the CGT concession stakeholder test. As a CGT concession stakeholder in the company or trust, you may be eligible for concessions if, together with other CGT concession stakeholders, you hold at least 90% of the shares or interest.

‍Do these rules apply to shares or trust interest held as an investment? Unfortunately, the Small Business CGT Concessions do not apply to passive investments. To qualify for the concessions, the shares or trust interest must be related to your active small business operations.

Next Steps:

If you are contemplating selling shares in your company or your interest in a trust, it is crucial to understand the potential tax implications. The Attune Advisory team is here to help you navigate this complex area with tailored, strategic advice that ensures you benefit from all applicable tax concessions.

Book an appointment with us via email or call the Attune team on 1300 866 113 to discuss your situation in detail. Our team will provide tailored, strategic advice to help you make informed decisions based on your unique circumstances.

Navigating the complex world of small business CGT concessions doesn’t have to be a solo journey. With expert guidance from Attune Advisory, you can confidently move forward, knowing you are minimising your tax liability while maximising your financial position. As you embark on the path of selling shares or trust interest, our dedicated team is here to support you every step of the way. Trust in our expertise to make the most of your financial opportunities and secure a prosperous future for your business.