Small Business CGT Tax concessions



From: Robert Longmore

There are 4 new CGT concessions for small businesses introduced as part og the Ralph Reforms, and effective for CGT events after september 21 1999.
1- The 15 year total CGT exemption
2- the 50% reduction in the capital gain,
3- the CGT retirement exemption and
4- the roll over deferral of CGT.

In order to to qualify for the concessions a business must meet 3 basic conditions.
1- Must be a Small Business with a net value of assets of the business and related entities of $5M or Less (but excluding private assets)
2- the CGT asset must be an "Active" asset (ie, business asset) and
3- if the asset is a share or an interest in a trust, there must be a controlling individual before the CGT event and the entity or person claiming the concession must be that controlling individual or spouse.

By utilising CGT strategies, a small business can virtually eliminate CGT on the sale of business assets (including goodwill).
Creating and building up goodwill and business property assets can now create tax free wealth!

please seek professional advice as the tax laws are complex.

An example.

A company with a net value of $3M has 2 50% shareholders, (therefor they both meet the controlling individual test)
They introduce a new shareholder to assist in expansion of the company. The new shareholder receives 10% of the shares, leaving the original shareholders with 40% each. there is No longer a controlling shareholder.
They have just received an offer for part of their business that results in a net CG of $2Million. CGT on the gain in the company will be $680,000. had they not restructured to introduce the new shareholder they could have immediately reduced CGT by half (saving $340,000) and implemented other elements of the concessions to at least defer payment of the balance and possably wiping out CGT in full, creating a total CGT saving of the entire $680,000!!

taken from My business magazine.

I am pretty sure these strategies could be easily adapted to company's used to control investment properties where the properties are the business assets.

but again please seek professional tax advice or speak to your accountant.

whoohoo my first post with no spelling errors (excluding typo's) :)

I hate paying TAX!!! especially when it get wasted on politicians perks.
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