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CGT small business concessions and contributions to super

Additional conditions for small business CGT concessions

Section: 8.7

The basic conditions must be met before any specific small business CGT concession can be claimed.

15-year exemption

The 15 year exemption allows a taxpayer to disregard all capital gain from the sale of a CGT asset.

Individual claiming the 15 year exemption

The following conditions must be met:

  • the taxpayer continuously owned the asset for the 15-year period leading up to the CGT event
  • the taxpayer is:
    • aged 55 or over and the CGT event happens in connection with their retirement, or
    • permanently incapacitated, and
  • if the CGT asset is a share in a company or an interest in a trust, the company or trust must have had a significant individual for periods totaling at least 15 years during the entire time the taxpayer owned the share or interest, even if it was not the same significant individual during the whole period.

Company or trust claiming the 15 year exemption

The following conditions must be met:

  • the taxpayer continuously owned the asset for the 15-year period leading up to the CGT event
  • the taxpayer had a significant individual for a total of at least 15 years of the whole period of ownership (even if it was not the same significant individual during the whole period)
  • just prior to the CGT event, an individual who is a CGT concession stakeholder is:
    • aged 55 or over and the CGT event happens in connection with their retirement, or
    • permanently incapacitated, and
  • if the CGT asset is a share in a company or an interest in a trust, that company or trust must have had a significant individual for periods totaling at least 15 years during the entire time the taxpayer owned the share or interest, even if it was not the same significant individual during the whole period.

Payments to stakeholders

A company or trust is not required to make a payment to one or more stakeholders in order to claim the 15 year exemption. However, a payment made within 2 years to a CGT concession stakeholder is exempt from tax, to the extent that the proportion of exempt gain distributed to the stakeholder does not exceed their 'stakeholder participation percentage'.

Small business retirement exemption

The small business retirement exemption allows a taxpayer to disregard capital gain from the sale of a CGT asset. The maximum amount of exempt gain is limited to $500,000 (lifetime limit) for individual taxpayers and $500,000 (lifetime limit) per eligible stakeholder for company or trust taxpayers.

Individual claiming the small business retirement exemption

The following conditions must be met:

  • a choice to disregard the capital gain (ie the CGT exempt amount) has been specified in writing by the day the taxpayer lodges their tax return for the year of the CGT event (or longer as permitted by the Commissioner), and
  • if the taxpayer is under age 55 just before making the choice, they must contribute an amount equal to the CGT exempt amount to a super fund at the later of when they made the choice, or receipt of the capital proceeds.

Company or trust claiming the small business retirement exemption

The following conditions must be met:

  • a choice to disregard the capital gain (ie the CGT exempt amount) has been specified in writing by the day the taxpayer lodges their tax return for the year of the CGT event (or longer as permitted by the Commissioner), and
  • the company or trust has made payment to at least one of its CGT concession stakeholders by the later of:
  • seven days after it makes the choice, or
  • seven days after receipt of capital proceeds, and
  • if a CGT concession stakeholder receiving a payment is under 55 (just prior to the payment), the company or trust must make the payment by contributing it to a complying super fund on the stakeholder's behalf.

50% (active asset) reduction

There are no additional rules for the 50% (active asset) reduction.

Taxpayers have the option of not applying the active asset reduction when selling CGT assets. By not applying this 50% reduction, the amount of capital gain that can be exempt under the $500,000 retirement exemption (and contributed to super under the lifetime CGT cap) can, in many cases, be maximised.

Small business rollover

The small business rollover broadly allows a CGT rollover to apply where the proceeds from the sale of an active asset are used to purchase a replacement asset.

The eligibility rules for the small business rollover concessions are not included in this guide. Refer to the ATO website for further information.

Last modified: Wednesday, January 10, 2018