As a small business owner it’s likely you have been investing in your business at the expense of making personal superannuation contributions. But the good news is, the small business CGT concessions may provide opportunity for you to reduce Capital Gains Tax AND catch up on your superannuation contributions.
What are the small business CGT concessions?
The small business CGT concessions aim to assist small business owners who sell their business to reduce or eliminate the CGT on disposal of the business. They also enable business owners to utilise the concessions and contribute business sale proceeds to their superannuation.
Assessing whether a business meets eligibility criteria for CGT concessions is complicated, depending on your business structure and if other linked entities are involved, and you will need professional advice.
Using small business CGT concessions to build your super
There are four possible CGT exemptions available and each has specific conditions.
In this article we focus on the two CGT exemptions which can help business owners boost their super by allowing contributions beyond the normal superannuation contribution caps:
#1 Small business 15-year exemption:
The 15-year exemption is usually the most effective for small business owners wanting to build their super balance using the proceeds from the sale of their business. Super contributions under this exemption are not subject to concessional and non-concessional contribution caps ($25,000 and $100,00 per annum, respectively). Instead they are measured against the lifetime CGT cap ($1.48 million for 2018/19), which means higher contributions than normal are allowed from the sale of your business.
Big benefits: Small business owners are able to eliminate all capital gains and contribute sale proceeds (up to $1.48 million) to their super.
#2 Small business retirement exemption:
The retirement exemption also enables small business owners to make superannuation contributions beyond normal contribution cap amounts. This exemption allows up to $500,000 of capital gain to be eliminated, and the equivalent amount to the gain (eliminated using the concession) to be contributed to super. This exemption allows a maximum contribution of $500,000, which means the lifetime CGT cap of $1.48 is not fully utilised.
For the best outcomes you need professional advice
Your accountant is best qualified for assessing your eligibility for small business CGT concessions and which exemption is right for your circumstances. We also strongly recommend that your financial adviser is present, as they will be involved with sale proceeds being contributed to superannuation.
Consideration of how the small business CGT concessions apply in your circumstances – where you are supported by both your financial adviser and your accountant – is an excellent example of the benefits of taking an integrated approach when managing your financial affairs. As a business owner in mining and resources, you will benefit significantly from accessing multi-disciplinary advice for achieving your business, financial, personal and lifestyle objectives. Resources Unearthed directly addresses the need for business owners to receive coordinated advice from a team of experienced advisers.
To find out more about your eligibility for the small business CGT concessions, or to discuss any other aspect of your mining and resources business, please contact Resources Unearthed on +61 (0)7 3007 2000 or contact@resourcesunearthed.com.au
Resources Unearthed is a solutions hub that provides integrated financial, legal, property and accounting & business advisory services for executives, professionals and business owners in mining and resources.
The information contained here is general and not intended to serve as advice. Any information supplied is not a substitute for independent professional advice. We do not warrant the accuracy, reliability, completeness or adequacy of the information or material. All information is subject to change without notice.
