There are some capital gains tax (CGT) concessions available to small business owners that can be used to minimise tax liability when you dispose of assets.
These CGT concessions can be extremely effective. You can apply as many as you are entitled to until your CGT bill is reduced to zero.
In order to qualify for these exemptions there are some basic conditions that need to be met:
• The total value of your business assets must not be more than $6 million or your turnover must be less than $2 million per annum
• You must incur a capital gain when you dispose of the asset
• The asset must be an active business asset
For a business asset to be considered as ‘active’ it must be used in the course of carrying out your day to day business. An asset that collects income for your business but is not used by your business directly is not classified as an active asset.
In order to be eligible to claim any of the CGT concessions the asset must have been active for at least 7.5 years, or half of the time that you have owned it (whichever is the shorter period).
There are four CGT concessions that are available:
1. The 15-year exemption: If your business has held the asset for over 15 years, and you are over the age of 55 and are retiring, then your entire CGT liability can be disregarded under the 15-year exemption rule.
2. The small business rollover: If your business purchases a replacement asset within two years of disposing of an old one, you can defer your CGT bill until you dispose of the replacement asset.
3. The 50% active asset reduction: If you dispose of an active asset and the 15-year exemption does not apply then you may be eligible for a 50% reduction on your CGT bill.
4. The CGT retirement exemption: A total CGT exemption of up to $500 000 is available to small business owners over a lifetime, and can be used to offset any CGT remaining after the other concessions have been applied. If you are under the age of 55, you must contribute the amount to your superannuation fund.
Our team of expert accountants are at hand to help with any small business CGT questions you may have and of course any general business advice you may be seeking.
Call (02) 4926 2300 or email us.
If you wish to discuss small business CGT please contact the team at Leenane Templeton.