A SME is a Small or Medium Enterprise (business)!
The CAPITAL GAINS TAX concessions on selling a business or business asset for an SME owner are compelling!
They include:
– The 50% general CGT Discount for owning an asset for more than a year
– The 50% active asset reduction
– The CGT Retirement Exemption (you don’t have to retire)
– The 15 year exemption
A quick example:
John (45yo) started his business with setup costs of $10,000 with his partner in 2009 and they sold it in 2015, 6 years later for $1,000,000.
This equates to a capital gain on sale of $990,000 or $495,00 for John’s 50%; John will reduce the gain in half by the general discount and in half again by the active asset reduction and can put the rest in Super where it will not be taxed.
Neither John nor his Super Fund will pay any tax on the below and all proceeds will end up with them – a great result!
|
Tax Calculation |
Cash |
||
|
Sale Proceeds |
495,000 |
495,000 |
|
|
General Discount |
247,500 |
|
|
|
Net Gain |
247,500 |
|
|
|
Active Asset Reduction |
123,750 |
|
|
|
Net Gain |
123,750 |
|
|
|
Super Retirement Contribution |
123,750 |
123,750 |
Super Fund |
|
Taxable Income/Cash Remaining |
NIL |
371,250 |
Cash |
|
Tax Payable |
NIL |
NIL |
Cash |
Note to qualify for these concessions there are conditions; turnover is less than $2m or net assets of the taxpayers are less than $6m and the asset is an active asset. The small business concessions are complex and you should seek professional advice.