As a small business owner, you must be aware of possible CGT concessions, eligibility criteria and how they work. We will share detailed information on CGT concessions to help you know how they work.
What are the eligibility conditions for CGT concessions?
To qualify for any of the CGT concessions, you are required to fulfil the basic eligibility requirements. Depreciating assets don’t meet the eligibility requirements:
- Any gain or loss from a depreciating asset under the uniform capital allowance system is included in your assessable income, or is deductible as a balancing adjustment, to the extent the asset was utilised for a taxable purpose. You are not allowed to apply for small business CGT concessions on the gains you make on depreciating assets that are included in your income.
- From a depreciating asset, a capital loss or capital gain arises when you’ve used it for a non-taxable purpose. Any capital gain, which shows the non-business use of the asset, is not eligible for the small business CGT concessions. To qualify for CGT concessions, you must meet common conditions. However, many of you may find it difficult to stay on top of these conditions, so it would be worth engaging a reliable accountant. If you are looking for the best accountant in Melbourne to handle your accounting activities in a business, you can consider choosing us.
How do small business CGT concessions work?
The small business concessions enable you to disregard, reduce or defer some or all of a capital gain from an active asset utilised in a small business. Here are the small business CGT concessions:
- Small business 15-year exemption
- Small business 50% active asset reduction
- Small business retirement exemption
- Small business roll-over
You may be eligible for concessions when you sell an active asset and meet basic requirements. After that, you must meet any additional requirements that apply to the individual concessions. There are conditions and rules about the order you apply:
- the CGT small business concessions
- any previous year or current year capital losses
- the CGT discount.You may be eligible to apply one or both of the following to all capital gains:
- more than one of the four concessions if you satisfy the requirements for each
- the CGT discount if it applies.
Many of you may not be aware of tax matters, and for this reason, many business owners often miss possible concessions or deductions. That’s why it’s always suggested to engage a professional tax accountant. You can also find someone near your area by searching online for best ‘tax accountant near me‘ .
Applying the small business CGT concessions
If you have more than one capital gain for the year, you are allowed to apply as many of the small business CGT concessions as you qualify for until each capital gain reaches zero. Each active asset’s attributable capital gain is evaluated for CGT concession conditions.
For small businesses, 50% active asset reduction is applied if the basic requirements are satisfied and you have not chosen not to apply. However, you need to choose whether to apply for the small business 15-year exemption, small business roll-over, and small business retirement exemption.
You must choose by the day when you it’s a time to file your income tax return for the income year in which the CGT event occurred, unless the ATO allows you to make the choice later. Preparing and filing your income tax return is proof of the choice you have made. However, for the small business retirement exemption, you need to have a written record of the amount that is intended to be disregarded. To maintain and keep records, you can seek help from a small business bookkeeper.
How do CGT concessions affect super contributions?
- Small business 15-year exemption
You may be eligible to make a contribution to your super fund from a small business 15-year exemption with no effect on your non-concessional contributions limits.
- Small business retirement exemption
You may be eligible to use amounts from small business retirement exemption as super contributions with no effect on your non-concessional contributions limits.
Conclusion
Now, you are aware of the working process of small business CGT concessions and their effect on super contributions. For more information, you can seek help from Reliable Melbourne Accountants.