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Small Business CGT Concessions

Posted by Northadvisory on June 17, 2016

If you are running a small business, pass the aggregated $2 million turnover test or pass the $6 million net asset value test, you may be entitled to the Small Business CGT Concessions when you sell active business assets.

There are four concessions that may be available if you meet the specific requirements of the concessions:

1) Small Business 15-year CGT Asset Exemption:

The entire gain on selling the business asset is exempt from CGT, with no further tax consequences. This concession is the most favourable of the four.

If you do not qualify for this exemption, there may be relief available using the other three concessions.

2) Small Business 50% reduction

After calculating your net capital gain as normal, and after applying any applicable CGT General Discounts, you may be able to reduce the resulting capital gain by another 50%. In total, this will be a total of a 75% Discount off the gross capital gain when applying the two discounts. This 50% reduction is optional, as some entities might be better off not using this discount but it must be used before using the next two concessions.

3) Small Business Retirement Exemption

A maximum lifetime cap of $500,000 applies to this exemption. The Net Capital gain may be reduced further by applying this exemption to it. It is an exemption allowed by the government specifically to provide funds for retirement. If you use this exemption and you are under 55 years of age, the exempted amount must be contributed into a complying super fund.

4) Small Business Rollover Relief

Where the gains have not been exempted by the above three exemptions, the small business rollover relief may allow you to defer the gain for up to 2 years after the sale if you are not replacing the asset that was sold within the 2 year period. If the asset is replaced, the capital gain may be reduced to a lesser amount or be disregarded in full.