When selling a business, it is always important to determine whether or not a seller can qualify for the small business CGT concessions to either exempt, reduce or defer a capital gain made on the sale.
When examining the small business CGT provisions to determine if a taxpayer would qualify for these concessions, there is an obstacle course of conditions that must be navigated, but if applied correctly, the concessions can deliver excellent results on the sale of a business. The CGT concessions are the:
For a taxpayer to be entitled to the concessions, the taxpayer must meet certain basic conditions (e.g. a taxpayer must have a total turnover of less than $2 million and be carrying on a business in the current year or have total net assets of $6 million or less just before the CGT event). In addition to meeting the basic conditions above and depending on which concession the taxpayer wants to claim, concession specific conditions will also have to be met.
If a taxpayer is selling business assets, the enquiry stops here – however, if the taxpayer is selling shares or an interest in either a company or a trust, additional conditions will have to be met:
Recently, a Bill passed the Senate that will make it even more difficult (i.e. impose more conditions) on taxpayers to qualify for small business CGT concessions if shares in a company or interests in a trust are sold on or after 8 February 2018. Treasury believes that these changes will stop schemes exploiting access to the small business CGT concessions (i.e. avoid concessions from being inappropriately applied when shares or interests in large businesses are sold).
The Bill imposes three additional conditions that have to be met when selling shares or an interest in companies or trusts (so in total there is now 4 conditions that will have to be satisfied when selling shares or interests).
According to these additional changes the concessions will only be available if (in addition to the conditions mentioned above):
As you can no doubt see, determining whether you can qualify for small business CGT concessions when you sell your business (either selling the business assets or the shares or an interest in a company or trust) is no simple task.
Therefore, please speak to Grantley Stevens or your Nexia Edwards Marshall Adviser so that we can perform proper due diligence and help guide you through this process.
The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.