Small business owners (annual turnover of less than $2 million) are entitled to claim capital gains tax (CGT) concessions on their active assets this financial year.
Owners can claim as many concessions as they are entitled to and reduce or remove their capital gains tax.
The 15-year Exemption
Has your business continuously owned an active asset for 15 years? Then providing you are aged 55 or over and are retiring or permanently incapacitated, you can disregard any CGT owed when you sell the asset. Companies and trusts must have a significant individual for 15 years during which time the asset was owned, even if it was not the same individual for the entire period. The significant individual must also be 55 years or older and retired or permanently incapacitated at the time the asset is sold.
50% Active Asset Reduction
Small business owners, companies and trusts can apply for a 50% reduction in capital gain providing the asset is owned for 12 months or more. This is an option to reduce CGT that is automatically applied for those who do not qualify for the 15-year exemption.
Small Business Retirement Exemption
You can opt to exclude the whole or part of the capital gain for up to a lifetime maximum $500,000. To qualify for the small business retirement exemption, you will not need to stop working or end your business. However, you will need to keep a written note of the amount you have chosen to disregard. If you are under the age of 55 just before you choose this concession, you will be required to transfer the amount of capital gain to a super fund or retirement savings account (RSA).
It is important to remember that you must roll over the capital gain to your super fund or RSA before the relevant date. Otherwise, the exemption will no longer be available. Individuals over 55 will not need to transfer any amount to a super fund or RSA.
Small Business Rollover
Individuals can choose to delay all or part of their capital gain if they sell and active asset. This concession is still available for individuals who have not yet obtained a replacement asset or incurred expense on capital improvement to a current asset. If you decide to select the rollover, it is important to remember that the capital gain is not included in your assessable income.