Understanding the subtleties of taxation is a challenging task, especially regarding the Small Business Capital Gains Tax (CGT) Concessions. These can significantly impact the tax outcome of your business or CGT business asset sale.
The four types of CGT concessions available in Australia can provide much-needed relief, but knowing which one applies to your situation can be complex.
Overview of the Four CGT Concessions
The Small Business CGT Concessions consist of four specific types: the 15-year exemption, the 50% active asset reduction, the retirement exemption, and the rollover concession. Each concession serves a unique purpose, designed to reduce your CGT liability under different circumstances.
15-year Exemption
If you’re 55 years or older and are retiring, or if you’re permanently incapacitated, the 15-year exemption may provide total relief from CGT when you sell a business asset. You must have owned the asset for at least 15 years, and it must have been an active asset for at least 7.5 of those years. The exemption allows you to disregard the entire capital gain from the sale.
50% Active Asset Reduction
This concession gives you a 50% reduction of the capital gain made on the sale of an active asset – that is, an asset used or held ready for use while running your business. This concession is often combined with the other concessions for greater CGT relief.
Retirement Exemption
The retirement exemption provides relief up to a lifetime limit of $500,000. If you’re under 55, the exempted amount must be paid into a complying superannuation fund or a Retirement Savings Account (RSA). 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 of the original CGT event and up to one year before the CGT event. The CGT liability is deferred until the replacement asset is sold.
FAQs on Small Business CGT Concessions
- Can I use more than one CGT concession?” The answer is yes. Certain concessions can be applied in conjunction with others, depending on your situation.
- “Can these concessions apply to a pre-CGT asset?” The answer is no. The CGT concessions only apply to CGT events, and pre-CGT assets are excluded from CGT events.
Next Steps
Understanding these CGT concessions and their applicability can significantly affect your tax planning strategies.
Impala Tax is here to help you through this process. We invite you to book an appointment online or call us at 0755361960. Our team will provide you with personalised advice tailored to your unique situation, ensuring you maximise the benefits from the CGT concessions available to you.
Remember, the complex world of Small Business Capital Gains Tax doesn’t need to be overwhelming. With the right help, you can navigate it successfully, protecting your financial interests while ensuring full compliance with the Australian Tax Office requirements. Your focus is to grow your business; ours is to support you in doing so.
