The ATO has found that there are some wealthier and larger businesses, who have unintentionally claimed the small business capital gains tax (CGT) concessions when they were not eligible for this. If larger businesses mistakenly claim CGT concessions, then they can either minimise or fully remove their taxable capital gain. However, in this case, even though they claimed CGT concessions, they have to pay tax. To know more about small business CGT concessions, keep reading this blog.
Small Business CGT Concessions
Generally, small business CGT concessions enable you to minimise, neglect or defer some or all of a capital gain from an asset that is active in a small business. You can access concessions if you dispose of an active asset and meet eligibility criteria. If you don’t know about different concessions, then you can seek help from a tax agent Melbourne.
The 4 Small Business CGT Concessions
As a small business owner, if any situation has made you re-evaluate your future, whether it be retirement or selling your company and starting over someplace else, keep in mind that there can be capital gains tax (CGT) concessions to such a move. The taxation system does, however, offer four exemptions that, under certain circumstances, allow qualified people to remove or at the very least minimise the capital gain on a CGT item. All the concessions have additional requirements you need to meet except for the small business 50% active asset reduction.
Small business 15-year exemption
The business may be eligible for a total exemption on a capital gain if the asset ownership has been for at least 15 years till the time of the CGT event. Or in cases where a CGT asset is a trust interest or share, the trust or company may have an individual for at least 15 years. For sole trader businesses, there is a condition that they must be aged 55 years and the CGT event happens because of either incapacitation or retirement. Moreover, if you don’t know about any type of concessions that your business can access, then you can ask tax accountant Melbourne for more details.
Small business 50% active asset reduction
The business may be eligible for an automatic 50% reduction of a capital gain if the basic conditions are met and the asset doesn’t need to be held for over 12 months. You’ll have to pay tax on 50% of the capital gain when you sell or dispose of an active asset. Apart from this, you can seek help from an accounting firm to get more clarity on small business CGT concessions.
Small business retirement exemption
A business that is a company, trust, or an individual can choose to neglect all or portion of a capital gain that was made from a CGT event, up to a lifetime limit of $500,000. If you are under 55, the exempt amount from the asset proceeds must be deposited into a compliant retirement savings account or superannuation fund. You can use amounts from the small business retirement exemption to contribute to your super fund without impacting your non-concessional contributions limits. You may not know about various exemptions and concessions that your business can access, but you can take help from a tax accountant, and if you haven’t hired an accountant, then you can also search for ‘tax accountants near me.’
Small business rollover
If the fundamental requirements are satisfied, a business may decide to roll over all or part of the capital gain and subsequently obtain a replacement asset. The rolled-over capital gain will be reinstated if a replacement asset is not obtained in the allotted time.
If you have a small business and are thinking of selling the business or retiring, then you can reach accountants because accountants know whether you are eligible for these types of concessions or not. If you are eligible for those concessions, then they can help you. Apart from this, before applying for any type of concessions or tax deductions, it is required to have proper transaction management, and for this, you need a professional bookkeeper Melbourne who will look after all your financial transactions and maintain all the records to make you prepared for the tax season.
The blog shares information on small business CGT concessions along with their different types. If you want to access those concessions, then seek help from a professional or you can also contact Accountants in Melbourne.