Small business CGT concessions
Small business entities are eligible for a range of tax concessions on capital gains that arise on the disposal of business assets. The concessions, which may be relevant to you in the context of planning for retirement, include:
- 15-year exemption
- retirement exemption
- 50% active asset reduction.
Analysis and documentation
If you apply any of these concessions in relation to your business assets, ensure you have understood and applied the concessions correctly and kept the required documentation. As always, where you're uncertain, it's good practice to get advice.
To manage risks around the small business CGT concessions, consider these suggestions:
- Retain documentation for each CGT asset for which the small business CGT concessions were claimed, documenting details such as
- the asset you sold
- the date on which you sold it
- the sale price
- the date on which you purchased it
- the buyer.
- If there are any affiliates or connected entities, analyse how this has affected the application of the concessions.
- Get an independent third party valuation of the relevant assets where they were sold to a related party or connected entity. If there was an earn-out clause or equivalent in the contract of sale, get a third-party valuation of the earn-out.
- Keep records that show how you satisfied the conditions for the small business CGT concessions. If the small business entity test was met, show how you determined your aggregated turnover. If the maximum net asset value test was met, record details of the net market value of assets, and those of any affiliates and connected entities just before the CGT event.
- Where the CGT asset disposed of was shares in a company or an interest in a trust, further details need to be kept, such as the full name and date of birth of each CGT concession stakeholder and their participation percentage.
- If you're required to roll over an amount of capital gain to your superannuation fund in order to make use of the concession, ensure that the correct amount is calculated and contributed to your superannuation fund. You'll also need to make a capital gains tax election and provide it to the fund’s trustee.
Small business entities are eligible for a range of tax concessions on capital gains that arise on the disposal of business assets. The concessions may be relevant to you in the context of planning for retirement.