If you’re planning a Lifetime CGT Cap contribution after selling your business, the timing of your contribution could have a significant impact on your future superannuation opportunities. While many business owners focus on minimising capital gains tax, fewer realise that the timing of this strategy can affect their ability to make future non-concessional contributions.
The Hidden Trap
A Lifetime CGT Cap contribution allows eligible business owners to contribute proceeds from the sale of a qualifying small business into super without using their normal contribution caps.
However, once the contribution enters your super fund, it increases your Total Super Balance (TSB). This increase can affect your eligibility to make future non-concessional contributions.
Your Total Super Balance is measured each 30 June and determines whether you can make future non-concessional contributions, including using the bring-forward rule. In many cases, the timing of your business sale contribution is critical to preserving future contribution opportunities.
Making this contribution too early could unintentionally reduce your ability to make additional contributions in later financial years.
Every Timeline Is Different
Sometimes delaying the contribution until the next financial year may preserve access to other contribution opportunities while still allowing full use of the small business CGT concessions.
The correct timing depends on:
- Your current Total Super Balance.
- Your previous contribution history.
- The settlement date of your business sale.
- Your retirement and succession plans.
- Whether other super contribution strategies are available.
Coordinating your tax and super strategies before settlement can make a meaningful difference to your long-term retirement savings. Getting advice before settlement may help you maximise your available contribution opportunities.
Speak With Forman Financial Services Before You Sell
Selling a business is often a once-in-a-lifetime event. The decisions you make before settlement can have lasting tax and superannuation consequences.
At Forman Financial Services, we help business owners structure their CGT contribution to super, coordinate tax and super strategies, and avoid costly mistakes before settlement.
Contact us here to discuss your circumstances before your business sale proceeds are received. Early planning can make all the difference.
Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us to discuss your Lifetime CGT Cap contribution and individual circumstances.