Ask an Adviser - Will I Be Eligible For Small Business Capital Gains Tax (CGT) Concessions?

Top answer provided by:

Tom O'Shea

Hi Jason,

Thanks for your question. It is definitely one of the more complex areas that we deal with as advisers and is difficult to deal with in a short answer.

For the purposes of others who may read this, the concept of the small business CGT concessions is to provide some relief from capital gains tax on selling a small business. There are different types of small business concessions that apply in different circumstances. To highlight the complexity of this scenario, one of the concessions can exempt all of the capital gain, one of them exempts up to $500,000 of gain, another can defer the gain and one reduces the gain by 50%.

However, the concessions are designed to apply to small business owners so to ensure that it is only small business owners who qualify, there are some conditions that must be met. There are basic conditions that apply across the board along with some other conditions depending on which concession you are trying to access.

A simple version of the basic conditions that apply across the board are as follows;

-          You must be selling an active asset (can include goodwill) AND

-          You have turnover of less than $2,000,000 OR

-          You have net assets of less than $6 million

You are likely to meet the active asset test but it looks like you might not qualify under the $2m turnover conditions. However you may qualify under the net assets conditions but you haven’t provided that information. If you do meet the basic conditions, you then will need to meet additional conditions depending on which of the concessions you are trying to access. There is too much detail to discuss that in this forum.

Importantly, there are very significant benefits to some of the concessions that can save many thousands of dollars. A good adviser and accountant will be worth their weight in gold in this scenario. They will help to determine if you meet the basic conditions, which of the concessions (and associated additional conditions) are relevant to you and the benefits that they will provide. What a mouthful!! They can also help you to decide what to do with the proceeds of the sale.

If you get nothing else from this answer, understand that it is a very complex area and making a mistake can be very costly so I can’t emphasise enough the importance of getting professional help.

 

Regards 

Tom

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Article by:

Tom O'Shea

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