Understanding CGT Concessions When Selling Shares in a Company or Interest in a Trust

We understand the intricacies of running a business and the numerous decisions you need to make daily. One of these crucial decisions could be selling shares in your company or your interest in a trust. However, understanding the taxation implications, specifically the Capital Gains Tax (CGT) concessions, might seem like an uphill battle. But don’t worry, we are here to guide you through this process.

CGT Concessions for Selling Shares or Trust Interest

When you sell shares in a company or interest in a trust, you may be eligible for Small Business CGT Concessions, potentially providing substantial savings. The rules and conditions can be complex, but understanding them ensures you make informed decisions and, potentially, maximise your financial outcomes.

Eligibility Criteria

The primary criteria for accessing the Small Business CGT Concessions when selling shares or trust interest are two tests: the Maximum Net Asset Value Test (MNAV) and the Significant Individual Test.

The MNAV test requires that the net assets of the entity selling the shares or trust interest, including connected entities, not exceed $6 million just before the CGT event.

The Significant 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.

Additionally, the company or trust must satisfy the active asset test, which 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 Selling Shares or Trust Interest

  • “What if I don’t pass the Significant Individual Test?” In that case, you can satisfy the CGT concession stakeholder test. If you are a CGT concession stakeholder in the company or trust and, together with other CGT concession stakeholders, you hold at least 90% of the shares or interest; you may still be eligible for CGT concessions.
  •  “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. The shares or trust interest must be related to your active small business operations.

Next Steps

If you’re contemplating selling shares in your company or your interest in a trust, it’s crucial to understand the potential tax implications. Impala Tax is here to help you navigate this complex area, ensuring you benefit from all applicable tax concessions.

Book an appointment online or call us at 0755361960 to discuss your situation in detail. Our professional team will provide personalised 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, you can confidently move forward, knowing you are minimising your tax liability while maximising your financial position.

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