There is no doubt that covid-19 made life tough for business owners in so many ways – staff shortages, lockdowns, supply issues, constant change and adaptation. So it comes as no surprise that we have experienced a record number of clients selling their businesses and moving on to something new or hanging up their boots for good!
Australia’s tax law provides four concessions to enable eligible small businesses to eliminate or at least reduce the capital gain on a CGT asset, providing certain conditions are met.
To be eligible to apply for these CGT concessions, the business must have a maximum net asset value of less than $6 million. And the business must qualify as a “CGT small business entity”. That is, it must be carrying on a business, and have an aggregate turnover of less than $2 million.
The CGT asset that gives rise to the gain must be an active asset, which simply means it is an asset used in carrying on a business by either you or a related entity. Shares in a company or trust interests in a trust can also qualify as active assets.
Once the basic conditions are satisfied, your small business can choose to apply one or more of the CGT concessions provided the additional conditions to each concession are also met.
The eligibility and rules are very complex and we strongly recommend you seek advice from your accountant first and foremost.
These concessions, when combined with other strategies utilised for retirement planning may be able to assist you to create the lifestyle you have dreamed of in your retirement. Careful planning is key to ensuring a good outcome and the timing of certain strategies and events can be critical.
We welcome working with your accountant in these situations, so please be sure to include us in the conversation.