If you’re selling your business to retire, taking advantage of the CGT small business concessions could enable you to manage tax and get more money into super.
How does the strategy work?
To use this strategy, you need to sell ‘active business assets’ and meet a range of other conditions.
Active assets are assets that are held or used in the course of carrying on your business or a business of someone else connected with you. Generally, this might include land and buildings and in limited circumstances, shares in the company.
If you have held the active business assets for 15 years or more, you may be eligible to claim the 15 year CGT exemption. This exemption can apply to pre-CGT assets and assets where there is no capital gain. It could enable you to disregard 100% of capital gains made when selling business assets and contribute up to $1,445 million to super by using the CGT cap.
In other circumstances, including where the active business assets have been held for less than 15 years, you may be eligible to use the CGT retirement exemption instead. This exemption enables you to disregard up to $500,000 in capital gains and invest up to $500,000 of exempt gains in super under the CGT cap.
Other key considerations
- If you are eligible and want to make a contribution into super and have the contribution count towards the CGT cap, you must provide your fund with a ‘CGT cap election’ form in the approved format at the time or prior to making the contribution.
- If you’re under age 55 and want to claim the CGT retirement exemption, you will need to invest the CGT exemption amount in super to qualify for the CGT concession. Also, you won’t be able to access the money until you meet certain conditions.
- If you plan to retire and are eligible to access your super, you might want to use up to $1.6 million to start a retirement phase income stream investment. By doing this, no tax will be payable on earnings in the fund, you can receive a tax-effective income under age 60 and all income payments received at age 60 or over will generally be tax-free.
SUPER TIP – Simple explanation of super strategies:
The following links are other super tips – click below
Convert your super into a tax-effective retirement income
Top up your income when cutting back work
Make insurance more affordable
Top up your super with help from the government
Sacrifice pre-tax salary into super
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