Many small business owners invest all their extra money into their business and then use the money from selling it to fund their retirement. This is one of the best strategies, particularly if you are taking the benefits of several small business capital gains tax (CGT) concessions on offer when you sell. These concessions are not only beneficial for reducing your CGT tax bill but can also enable you to contribute more money to your super account. Some small business CGT concessions can help eligible businesses contribute to their super after they sell without super contribution limits. If you don’t know the process involved in applying for this exemption, you can seek help from small business accountants in Melbourne.

How does 15 year CGT exemption work?

You are not liable to pay CGT when you sell an active asset if all the following conditions are met:

• You meet basic eligibility conditions.
• You or the significant individual is:
  • 55 years or above and the event occurred in relation to the retirement, or
  • Permanently incapacitated.
• You owned the CGT asset continuously for the 15-year time period ending just prior to the CGT event.
• A CGT event occurring in relation to one’s retirement is based on the situation of each case. There must be at least a significant reduction in the number of hours one works or a change in their present activities to be considered retirement. The timing may proceed to actual retirement.

There are modified rules regarding the conditions that the asset is owned continuously for at least 15 years for CGT assets obtained:

• Or transferred under the rollover provisions associated with assets obtained, destroyed, or lost.
• Because of a relationship or marriage breakdown.

You need to apply for the CGT 15-year exemption. If you don’t know what requirements you need to meet to apply for a 15-year CGT exemption, you can ask a tax accountant. When searching for the ‘best tax accountant near me’, make sure they are experienced and qualified. You don’t need to apply capital losses against capital gain before you apply for the small business 15-year exemption.

Revised Rules – Involuntary Disposals and Relationship Breakdown Rollover

To qualify for the small business 15-year exemption, you must have owned the CGT asset for at least 15 years.

However, there are adjusted rules for CGT assets that are acquired or transferred under rollover provisions related to assets that have been compulsorily acquired, lost, destroyed, or due to a marriage or relationship breakdown.

When determining if the 15-year ownership requirement is met, you have the option to:

• Include the ownership time of your former spouse, or
• Start the ownership period from when the asset was transferred to you.

If you choose to include your former spouse’s ownership period, the asset is considered as if you acquired it at the same time your former spouse did.

If you acquired a replacement asset due to the compulsory acquisition, loss, or destruction of a CGT asset, the replacement asset will be treated as though you acquired it when you originally acquired the initial asset.

How long do you need to keep capital gains tax records?

You must record and maintain CGT records for five years after disposal of an asset unless you maintain an asset register. If you find it difficult to keep records for five years, you can get bookkeeping services in Melbourne to ensure consistency in records. The CGT asset register is a register, which contains the information about your CGT assets that you’ve transferred from your CGT records. You are allowed to discard your CGT records 5 years after receiving an asset register entry certified if you satisfy all of the following requirements:

• you enter all important information about an asset in the CGT asset register
• the entry is in English language and certified in writing by an approved individual
• The asset register entry is confirmed as valid after December 31, 1997.

Conclusion

You need to understand the small business CGT concessions 15-year exemption requirements or eligibility criteria to claim it. You can reach out to Reliable Melbourne Accountants to claim a 15-year CGT exemption.