Baby boomers, small businesses and CGT
Over the next several years baby boomers will be selling their businesses to retire. When they do they may well be attracting Capital Gains Tax (CGT) issues. If you are selling or planining to sell your business there are CGT concessions that may apply to your circumstances. The concessions can dramatically reduce CGT liabilities.
Various CGT concessions have been available to businesses and investors for some time. In recent years the government has implemented CGT concessions that apply specifically to “small businesses”. There has also been lots of fiddling with the rules and guidlines. Variations to the “small business” concessions now exist for different periods with the latest rules applying from 1 July 2007.
If you are selling or planning to sell your business and you expect capital gains consequences you need to know the rules. Start planning your tax effective business exit plan now. Contact My Tax Zone for taxation insight and solutions.
Concessions for “Small Business Entities”
A small business with turnover of less than $2 million is eligible for a range of concessions. The new concessions for “small business entities” replaces the Simplified Tax System (STS).
Eligible businesses can pick and choose the concessions that best suit their needs, helping them to reduce red tape and compliance costs. In most cases, if you are currently using these concessions, these changes won’t affect your eligibility or how you continue to access them.
Small businesses with less than $2 million turnover may be eligible for the following concessions from 1 July 2007:
- choice to account for GST on a cash basis
- choice to pay GST by installments
- annual apportionment of GST input tax credits
- simplified trading stock rules
- simpler depreciation rules
- entrepreneurs’ tax offset
- CGT 15-year asset exemption
- CGT 50 per cent active asset reduction
- CGT retirement exemption
- CGT roll-over provisions
- PAYG instalments based on GDP-adjusted notional tax
- two-year period for amending assessments (exceptions may apply)
- immediate deductions for certain prepaid business expenses, and
- FBT car parking exemption (will apply from 1 April 2007).
Eligibility for some of these concessions will be dependent on satisfying some additional conditions. For more information on each concession affected by the change, see FREE fact sheet What are the small business concessions?
