In this guide
- How does the 15-year CGT exemption work?
- Am I eligible for the small business 15-year CGT exemption?
- Contributing to your super using the 15-year exemption
- How do I elect to exclude contributions into my super account?
- Q&A: Can I still put money into super using the 15-year CGT exemption if I already have $2 million in super?
If you are a small business owner looking to use the capital built up in your business to help fund your retirement, you’re in luck. There are two capital gains tax (CGT) exemptions with the potential to boost your super when you sell your business assets.
Learn more about how you can use these small business CGT exemptions to boost your super.
This article covers the 15-year exemption (Subdivision 152-B of the Tax Act) which is the most generous of the exemptions.
If you are not eligible for the 15-year exemption you may be eligible for the retirement exemption which you can read about in our guide here.
Need to know
The eligibility criteria for the government’s four small business CGT concessions are very complex. This is an area where it’s vital to get specialist tax advice to ensure you understand how the rules apply to your situation and whether you qualify.
There are also strict rules on the order in which you can apply the concessions and your resulting tax position can vary significantly. Ensure you consult a licensed tax adviser before making any decisions or contributing to your super account.
How does the 15-year CGT exemption work?
The 15-year CGT exemption is the most favourable of the four small business tax concessions and it must be applied first to any capital gain from the sale of your business assets.
Under the 15-year CGT exemption:
- The entire capital gain you have made on your business over the years is disregarded by the ATO
- You don’t need to use any capital losses you have accrued to offset the capital gain
- The entire sale proceeds up to the Lifetime CGT Cap (see section below) can be contributed into your super account and is not counted towards the non-concessional contributions cap.
Learn about non-concessional contributions.
This concession can be a great way to avoid paying a lot of CGT on the capital gain you’ve built up in your business over the years, while also boosting your super account as you near retirement.
Example
Ayumi is a conveyancing professional who has operated her own business for 20 years. She is thinking about selling the business and retiring.
Ayumi is aged 58 and has an annual turnover under the $2 million threshold for the small business CGT concessions. As a first step towards retirement, Ayumi sells her business premises, resulting in a capital gain of $600,000.
As she satisfies both the basic and additional conditions for the 15-year CGT exemption, her capital gain of $600,000 is disregarded for CGT purposes and her capital losses are not affected. This means her taxable capital gain after the sale is $0.
Over the years Ayumi has contributed very little to her super account, so she decides to make a big contribution from the proceeds of selling her business premises. She takes advantage of the super contribution rules for the 15-year CGT exemption by contributing the $600,000 into her super account.
Ayumi provides her fund with a CGT cap election form prior to making her contribution, to ensure it is excluded from the non-concessional cap..
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