Like many business owners, you have spent years fully invested in your business, personally and financially, and as you nudge closer towards retirement, you may be starting to worry about your super and life after business. If you are selling your business, CGT concessions could help you boost your super.
The small business CGT concessions assist business owners in reducing or eliminating Capital Gain Tax (CGT) when selling certain business assets as well as providing owners with the opportunity to contribute proceeds from the sale of their business to super.
If you are selling your business, you may be able to access the small business CGT concessions and use the proceeds from the sale to boost your super, without the normal restrictions associated with super contributions.
Benefits for business owners*
While CGT concessions can be extremely beneficial for business owners, seeking professional advice is vital. There are four available exemptions that can be used on their own or in conjunction with each other, and each have specific conditions and tax implications. They are:
Available small business CGT concessions:
1. Small business 15-year exemption
2. Small business 50% active asset reduction
3. Small business retirement exemption
4. Small business rollover
There are a number of other considerations too, including:
– If you have owned your business for more than 15 years, you will not need to pay Capital Gains Tax on the proceeds from the sale of your business.
– The concessions benefit small businesses, those with a turnover of less than $2 million per annum, and less than $6 million in net assets.
– You can contribute up to $1.48 million (2018/19 lifetime CGT cap amount) to your super from the proceeds from the sale of your business (if using the small business 15-year exemption).
– You can eliminate up to $500,000 of capital gains, which can be contributed to your super (if using the small business retirement exemption).
– You can make CGT concession contributions to your super even if your total superannuation balance is more than $1.6 million allowed under the normal rules with super.
– Business CGT contributions don’t count towards non-concessional contribution caps.
How it works
The following scenario outlines how the small business 15-year exemption works:
Scenario: Jane is 60 years old and has owned and run a small printing business, held in a family trust, for the last twenty years. She has $200,000 in superannuation savings. Jane sold her business for $1.8 million with the intention of retiring. Because Jane has owned the business for more than 15 years, and is over age 55, she is able to utilise the 15-year exemption small business CGT concession. Through the exemption, Jane is exempt from Capital Gains Tax and is able to contribute $1.48 million into her super (which is the maximum allowable under the lifetime CGT cap for 2018/19). It’s important to note, the $1.48 contribution is not treated as a non-concessional contribution and CGT contributions can be made even if Jane had reached her $1.6 million total superannuation balance.
The end result is that Jane successfully boosted her super and because she is over the preservation age, she can immediately begin enjoying a tax free income from her super.
*The Fine Print
There is strict eligibility criteria including qualifying as a small business and meeting the active asset test. Making the most of the concessions will depend on your circumstances, financial and retirement goals and business structure.
While there are four concessions available (outlined above), only two enable business owners to contribute to super beyond the normal superannuation contribution caps (small business 15-year exemption and small business 50% active asset reduction).
As specialists in superannuation, we can help our clients make the most of opportunities associated with super and consider appropriate and tax-effective approaches to helping you achieve a passive income stream in retirement, and enjoy the self-funded retirement lifestyle of your choice.
If you would like to discuss life after business in further detail, or would like a second opinion, we encourage you to make an appointment. Contact us today on 03 9708 8801 or email firstname.lastname@example.org
In our next ‘Life after Business’ article, we focus on income sources in retirement.
Robinson Voss Financial Pty Ltd T/A Robinson Voss Partners is a Corporate Authorised Representative (No 001263089) of GPS Wealth Ltd AFSL 254 544 Australian Credit Licence 254 544 ABN 17 005 482 726. www.gpswealth.com.au
General Advice Disclaimer: The information contained within this document is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Robinson Voss Partners (RV Partners) strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.