As a small business, you may be eligible for capital gains tax (CGT) concessions on assets used to conduct your business. We call these ‘active assets’.
Eligibility conditions to access these concessions when any of the following apply:
- you’re a small business with an aggregated annual turnover of less than $2 million
- your asset was used in a closely connected small business
- you have net assets of no more than $6 million (excluding personal use assets such as your home, to the extent that it has not been used to produce income).
There are four concessions that allow you to disregard or defer some or all of a capital gain from an active asset used in a small business:
- 15-year exemption– If your business has continuously owned an active asset for 15 years and you’re aged 55 or over and are retiring or permanently incapacitated, you won’t have an assessable capital gain when you sell the asset.
- 50% active asset reduction– You can reduce the capital gain on an active asset by 50% (in addition to the 50% CGT discount if you’ve owned it for 12 months or more).
- Retirement exemption– Capital gains from the sale of active assets are exempt up to a lifetime limit of $500,000. If you’re under 55, the exempt amount must be paid into a complying super fund or a retirement savings account.
- Rollover– If you sell an active asset, you can defer all or part of a capital gain for two years, or longer if you acquire a replacement asset or incur expenditure on making capital improvements to an existing asset.
You must meet eligibility conditions to access these concessions. There are additional conditions if the asset is a share in a company or an interest in a trust. Moreover, there are other CGT exemptions, rollovers and concessions that aren’t specific to small businesses. You may still be able to access these, if eligible. If you have any enquiry, please contact the Business Mantra experts and we are glad to assist you. You can call us on (08)9242 3555 or email us at firstname.lastname@example.org.