Selling Your Business

• Companies do not receive the 50% general discount
• The owner(s) need to have owned the business / asset for more than 1 year – CGT discount 50%
• Taxpayer group:
  • Must be under $6M in net value; or
  • Under $2M turnover threshold
• Any assets sold must be ‘active assets’ used in the business for a certain period
• To maximise the concessions, the business owner(s) might need to use the ‘retirement exemption’, rolling up to $500,000 per  individual of their sale proceeds into superannuation

A client approached us with a plan to sell their business in two years’ time. The business was owned in a company structure and because the client had time on their side, we were able to implement a solution to ensure all considerations were met. Below is a comparison study showing the change in the client’s net result, assuming the final capital gain is paid out to an individual from the company, before and after our meeting with them.

As you can see above, by converting $600,000 of liquid assets (cash/shares) and making a non-concessional contribution to superannuation, the small business CGT concessions can now be applied as the total asset values included for the small business calculations is now under $6M.  So, after executing the above simple strategy what result can we achieve after sale of business goodwill:

* Without proper advice, the business was unable to meet the conditions to access small business CGT concessions – as such, the entire capital gain has become taxable in the hands of the company.

Without expert advice, results like this may not be achieved. There are two very common explanations why business owners miss these generous tax concessions, these being:

1. You leave it too late to inform your advisors about your intention to sell; or
2. Your advisors do not have a thorough understanding of the legislation and the possible restructuring opportunities

As taxation specialists, our focus is on providing the best possible outcome for business owners.

You face the real chance of missing out on the generous small business capital gains tax concessions through a lack of pre-sale planning. Poor planning in this area could result in you losing potentially $1 million in legitimate tax concessions. As an example, if you currently operate out of a company (Pty Ltd) structure you are NOT eligible for the 50% general discount on capital gains.

Timing is critical, almost all restructure options are lost once you have signed a contract, even super contributions made post contract date are invalid when looking at the $6M net asset test.

For an obligation free review on how our capital gains tax solutions can help secure your future, before you sell, we have a couple of questions for you.

An asset is an active asset if it has been used while carrying on a business by the owner, an affiliate or an entity connected to the owner. If you are selling the entire business the answer should be yes.