CGT small business concessions and contributions to super
Capital gains tax (CGT) concessions for small business
Small business entities include a sole trader, partners in a partnership, trusts and companies. The word 'entity' will be used in this section to describe 'small business entities'.
Four main small business CGT concessions
Small business owners have potentially one of, or a combination of, the following four concessions available to them to reduce any capital gain upon the sale of active assets of a business:
- The small business 15-year exemption (allows a business person to disregard the entire capital gain for tax purposes).
- The small business 50% (active asset) reduction.
- The small business retirement exemption (allows a business person to disregard up to $500,000 of capital gains for tax purposes).
- The small business rollover (allows deferral of the capital gain realised on the sale of active assets of the business where the proceeds are used to purchase replacement assets).
In addition, a small business owner who is an individual taxpayer may also be eligible for the 50% individual discount for CGT assets held for longer than 12 months.
There are some basic conditions that must be met for an entity to qualify for any of the four main concessions above. There are also additional requirements to be met that are specific to each concession.
Only amounts related to the small business 15-year exemption and $500,000 small business retirement exemption potentially qualify to be CGT cap amounts for super.
The small business capital gains tax concessions are complex and depend on a client's specific situation.
The following is a summary of the way the rules operate in the majority of situations. However, depending on a client's particular situation, some modifications or additional rules and restrictions may apply.
Clients should ensure that they confirm their entitlement to the small business CGT concessions with their tax adviser.
Last modified: Wednesday, January 10, 2018