5 tax tips for small businesses – Small business CGT concessions

A few tips that small businesses should consider when preparing their tax returns are:

1. Check if you are applying the correct company tax rate;
2. Check if you are entitled to the small business income tax offset;
3. Check if you are entitled to a small business CGT concession;
4. Ensure that deductions are only claimed for business (not personal) expenses; and
5. Keeping the right records to support your claims.


Small business CGT concessions

There are four small business CGT concessions that may allow a small business to disregard or defer some or all of a capital gain from an active asset used in a small business.

If your business has disposed of an eligible active asset used in a business for a profit, you should consider if these concessions can apply to reduce the amount of tax payable by the business.

Broadly, these concessions are available when you dispose of an active asset and:

  • you’re a small business with an aggregated annual turnover of less than $2 million; or
  • your asset was used in a closely connected small business; or
  • you have net assets of no more than $6 million (excluding personal use assets such as your home, to the extent that it has not been used to produce income).

Tip! Your tax adviser can assist you in determining whether these conditions are satisfied. For example, your tax adviser can assist you in determining whether the asset in question satisfies the active asset test.

If available, these concessions can be very beneficial to small businesses. The concessions are:

  1. 15-year exemption – no assessable capital gain on the sale of active assets owned by a business for 15 years where certain other conditions are satisfied (eg you are over 55 or retiring).
  2. 50% active asset reduction – capital gains on the sale of active assets can be reduced by 50%.
  3. Retirement exemption – Capital gains from the sale of active assets are exempt (subject to a lifetime limit of $500,000). If you’re under 55, other conditions apply.
  4. Rollover – defer capital gains made on the sale of active assets for two years (or longer in certain circumstances).

You can find the basic conditions to qualifyfor the small business CGT concessions at this link – https://www.ato.gov.au/

4. business (not personal) expenses >

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Thompsons Australia Newsletters and articles are distributed by professional tax practitioners to provide information of general interest to our clients. The content of this newsletter does not constitute specific advice. Readers are encouraged to consult their tax adviser for advice on specific matters.

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