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CGT small business concessions and contributions to super

Contribution of eligible small busines sale proceeds

Section: 8.1

A small business owner may contribute certain sale proceeds from the sale of eligible assets, or eligible payments they have received from a company or trust due to the sale of eligible assets, and elect for them to count towards a separate lifetime CGT cap, rather than the non-concessional or concessional caps.

Contributions counting towards the lifetime CGT cap can occur in relation to the small business CGT concessions below.

It's also important to note that normal contribution eligibility rules apply to the contribution of eligible small business sale proceeds. Refer to section 1 for contribution eligibility rules.

15-year exemption:

Individual claiming the 15 year exemption

If the sale of an asset qualifies for the 15-year exemption on the capital gain, the owner can contribute all or some of the total proceeds from the sale and elect for it to count towards the lifetime CGT cap. The proceeds from the sale will likely exceed the capital gain from the sale.

If the sale of an asset would otherwise qualify for the small business 15 year exemption, but does not because:

  • the asset was a pre-CGT asset
  • there was no capital gain on the disposal of the asset or
  • the asset was sold within the 15 year timeframe due to permanent incapacity,

the owner can contribute all or some of the total proceeds from the sale to super and electing for it to count towards the lifetime CGT cap.

Company or trust claiming the 15 year exemption

If the sale of an asset qualifies for the 15 year exemption, the company or trust may distribute part or all of the total proceeds to its CGT concession stakeholders.

A client who is a CGT concession stakeholder and who receives such a payment within 2 years of the CGT event happening representing 15 year exemption proceeds can contribute it to super and elect for it to count towards the lifetime CGT cap. However, if any part of the payment received exceeds the client's stakeholder participation percentage in the company or trust, the client cannot elect to count the excess towards the lifetime CGT cap (normal contributions caps would apply to the excess).

If the sale of an asset would otherwise qualify for the small business 15 year exemption, but does not because:

  • the asset was a pre-CGT
  • there was no capital gain on the disposal of the asset or
  • the asset was sold within the 15 year timeframe due to permanent incapacity, and a client who is a CGT concession stakeholder receives a payment representing the sale proceeds within 2 years of the CGT event, they can contribute it to super and elect for it to count towards the lifetime CGT cap. However, again, if any part of the payment received exceeds the client's stakeholder participation percentage in the company or trust, the client cannot elect to count the excess towards the lifetime CGT cap (normal contributions caps would apply to the excess).

$500,000 small business retirement exemption

Individual claiming the small business retirement exemption

If the sale of an asset qualifies for the small business retirement exemption, the owner can contribute all or some of the exempt capital gain to super and elect for it to count towards the lifetime CGT cap. The capital gain that is exempted from capital gains tax is limited to a lifetime limit of $500,000.

Note: where an owner is under age 55 just prior to choosing for the retirement exemption to apply or receiving a payment, the exempt amount must be contributed to superannuation in order for the retirement exemption to be claimed.

Company or trust claiming the small business retirement exemption

If the sale of an asset is to qualify for the small business retirement exemption, the company or trust must distribute the exempt capital gain to one or more CGT concession stakeholders. A client who is a CGT concession stakeholder and who receives such a payment representing exempt capital gain can contribute it to super and elect for it to count towards the lifetime CGT cap.

The amount of exempt capital gains that a company or trust can pay to a particular CGT concession stakeholder under the retirement exemption, and therefore the amount of contribution that can be made under this concession, is limited to a lifetime limit of $500,000.

Note: where a CGT stakeholder is under age 55 just prior to receiving a payment from the company or trust, payment must be contributed to superannuation on their behalf in order for the retirement exemption to be claimed.

Last modified: Wednesday, January 10, 2018