Capital Gains
9. Small Business Concessions
Last updated: 03 Jul 2015
- If your business satisfies the eligibility tests for small business CGT concessions you then need to consider whether you satisfy the requirements for any of the four CGT concessions available to small businesses. These are the:
- 15-year exemption;
- 50% reduction;
- retirement exemption; and
- roll-over relief.
- The ‘15 year exemption’ is a full exemption from capital gains tax if the relevant capital gain results from an individual’s retirement.
- What is ‘retirement” for this purpose is a question of fact depending on each case.
- Although there need not be a permanent withdrawal from the workforce most taxpayers may find it difficult to claim this exemption because the following conditions also need to be satisfied:
- you must have owned the asset continuously for 15 years before its sale; and
- you must be at least 55 years old or be permanently incapacitated.
- If you are selling shares or units in a trust there are additional requirements if you want to claim the 15 year exemption.
- The most important deduction for most business owners is the 50% deduction that is available to individuals and small businesses if the asset that has been sold was owned by the seller for at least 12 months.
- If you qualify for the 15-year exemption this reduction will not be available.
- The retirement exemption is available regardless of whether you are above or below 55 years of age.
- However if the individual is under 55 the exempt amount must be contributed to a complying superannuation fund or retirement savings account.
- In the case of an individual the amount to be exempted must be less than the individual’s CGT retirement exemption limit.
- The limit is $500,000 reduced by any exemption already claimed under this category of concessions.
- Roll-over relief allows you to defer CGT on active assets if you use the capital gain to purchase a replacement asset or carry out capital improvements to another active asset.
- For example if you have a net capital gain of $10,000 that is reduced after other concessions to $8,000 you may claim a roll-over of $6,000 so that only the remaining $2,000 will be taxable as capital gains.
- The replacement asset may be purchased in the year before the capital gain is made or up to two years afterwards.
- If an asset is not purchased as a replacement asset before the expiry of a specified period there could be claw back of the roll-over claimed.
View more Information on Tax & Superannuation