<< Back to Blog

Selling your business? A CGT case study

Posted on

Anna is 51 years old and owns business premises from where she has been running a giftware shop. Deciding to sell the property asset, she explores options to reduce or eliminate her Capital Gains Tax (CGT) liability.

The following CGT strategies exist but Anna may not find them suitable for her needs. For the purpose of this case study, Anna purchased the premises ten years ago and has been operating her business there for the past eight years.

Small business 15 year exemption

Qualifying business assets do not incur CGT. To be eligible, Anna would need to keep her premises for a further five years to bring her continuous ownership to 15 years. Her business would need to have used the asset for at least half that time.

As Anna has operated her shop from the premises for eight years, in five years she will meet the criteria and its sale will be CGT exempt.

Small business 50% active asset reduction

Eligible business assets may claim a 50% reduction in CGT. To qualify, Anna’s business premises must be:

Anna purchased the premises only ten years ago but given that the business has operated there for more than half of that time (eight years), she qualifies for a 50% reduction on realised capital gains.

Small business retirement exemption

As Anna is under 55, she is exempt from paying CGT if she contributes the proceeds of the sale of her business asset to a complying superannuation fund. Issues to consider for this option include:

  • she cannot access the money until she retires,
  • she must not exceed the capital gains lifetime limit of $500,000 – the maximum amount of capital gains exemption an individual is entitled to over a lifetime.

To receive the exemption, Anna must notify her super fund at the time she makes the contribution that she is electing to contribute under the small business retirement exemption.

Other considerations:

  • Anna may defer all or part of the CGT for two years or more if she acquires a replacement business asset.
  • Anna can offset capital losses against the capital gain.
  • Other CGT discounts may apply.

Combining exemptions

It may be possible for Anna to claim a combination of exemptions, but a particular order must be followed. This chart shows the order in which Anna may claim exemptions.

Each option Anna considered came with conditions however after speaking with a tax agent and her financial adviser, she was able to arrive at a decision that suited both her current and future needs.


<< Back to Blog

Contact Us

p. +61 7 3832 5777
f. +61 7 3832 5778
e. admin@dolfinwise.com.au

The Right Start
Bronnie Abraham recently featured in the Financial Planning Magazine as the latest winner of the Gwen Fletcher Memorial Award for being the highest achiever in the CFP Certification Unit.
Continue reading...

Bronnie Abraham wins Gwen Fletcher Memorial Award
Dolfinwise financial planner Bronnie Abraham is the winner of the latest FPA Gwen Fletcher Memorial Award
Continue reading...

Planning on Investing? Have you considered a Super option?
Dolfinwise adviser Jason Bragger has been selected as the Superannuation Expert in the Financial Planning Association's "Financial Planning Week". Read Jason's Super & Investment Blog here.
Continue reading...

Dolfinwise announce merger
Dolfinwise is proud to announce the merge of Cameron Renshaw & Associates with Dolfinwise commencing 1st June 2013. Financial adviser Howard Querido will join the merged firm
Continue reading...

See More
Financial Planner Dolfinwise © 2019 | Legal Notes | Useful Sites | Web Design Brisbane by TwoCents Group Intelligent Advice