Saving Money on Taxes Is Easy with ATO Small Company CGT Concessions
The ATO small business CGT concessions are a great way to save on taxes when selling your business. By using these concessions, you can keep more of the sale proceeds for yourself. However, it is important to remember that these concessions are only available if you meet certain conditions. If you do not meet the conditions, you may have to pay more tax on the sale of your business.
How do the ATO small business CGT concessions work?
The ATO small business CGT concessions can provide significant tax relief for eligible small businesses. The concessions can apply to the sale of a business, or an asset used in a business, and can exempt up to $500,000 of capital gains from tax.
To be eligible for the concessions, you must:
– have carried on a business in Australia at any time during the 12 months before the CGT event;
– have net assets of less than $6 million immediately before the CGT event; and
– satisfy one of the other conditions set out in the legislation.
If you do not satisfy all of the eligibility criteria, you may still be able to access some of the concessions if your CGT event results in a capital gain that is less than your relevant threshold (generally $37,000).
The ATO small business CGT concessions can provide significant tax relief for eligible small businesses. The concessions can apply to the sale of a business, or an asset used in a business, and can exempt up to $500,000 of capital gains from tax.
What are the eligibility requirements for the ATO small business CGT concessions?
The ATO small business CGT concessions are a set of tax concessions that can significantly reduce the capital gains tax (CGT) liability for small businesses.
To be eligible for the concessions, a business must:
* Be a ‘small business’ as defined by the ATO – generally, this means having an aggregated turnover of less than $2 million per year.
* Have owned the relevant asset for at least 12 months prior to disposal.
* Use the proceeds from the sale of the asset to reinvest in another active asset, or to pay off debts associated with the business.
If these conditions are met, then a number of generous CGT discounts and exemptions may apply. For example, a 50% discount is available on any capital gain made on the sale of an active asset used in a small business. This can effectively halve the amount of tax payable on such a gain.
There are also several other possible concessions and exemptions that may apply in certain circumstances – for example, if a small business is sold as a going concern, or if all or part of the proceeds is used to fund retirement. The ATO website provides more information on these and other possible concession eligibility requirements.
How can I maximise the benefits of the ATO small business CGT concessions?
The ATO small business CGT concessions provide significant relief for many small businesses when selling their business. The most important concession is the 50% active asset reduction, which can reduce the capital gain by up to 50%.
Other important concessions include the 15-year exemption, which exempts gains from the sale of a business that has been owned for 15 years or more, and the retirement exemption, which exempts gains from the sale of a business where the proceeds are used to fund retirement.
To maximise the benefits of these concessions, it is important to ensure that you meet all the eligibility criteria. For example, you must have owned your business for at least 12 months before selling, and you must not have made any changes to your business during this period that would make it ineligible for the concession (e.g. changing from a sole trader to a company).
If you do meet all the criteria, then you should calculate your capital gain using both the concessionary methods and compare this to your capital gain without using any concessions – if the difference is significant, then it may be worth claiming the concession.
It is also important to be aware of any restrictions on how you can use the proceeds from your sale.
