The CGT cap is the maximum lifetime amount of capital gains that you can exclude from your non-concessional (after-tax) super contributions cap. The lifetime CGT cap for the 2018/19 financial year is $1,480,000.
How does the CGT cap operate?
You can only include capital gains from the sale of small business assets in your CGT cap if you use the funds to make a super contribution and you satisfy one of the following criteria:
- you qualify for the small business 15-year exemption (i.e. you owned the asset you sold for at least 15 years), or
- you qualify for the small business retirement exemption. The small business retirement exemption allows you to disregard all (or part) of any capital gains made on the sale of a small business or its assets, up to a lifetime limit of $500,000.
In addition, the net value of your other personal assets cannot exceed $6 million, and the asset sale for which you’re claiming the CGT exemption must have been an “active” asset. This means that it must have been either used in the course of carrying on your business at the time of its sale, or it must have been an intangible asset (like goodwill) that’s connected to the business.
How do you claim the CGT cap?
If you’re eligible, you can claim either the small business 15-year exemption or the small business retirement exemption for capital gains proceeds on the sale of assets via completing the Capital gains tax cap election form. This form is available online from the Australian Taxation Office (ATO). It must be given to your super fund at the time you contribute the capital gain funds that you’re claiming.
It’s worthwhile to see independent professional advice before claiming small business CGT concessions for your super contributions.
The information contained in this article is general in nature.