When is Capital Gains Tax applicable on a business sale?
small business is an exceptional investment that will not only increase in
value with improved performance but it will also provide the owner employment,
an above average return, a sense of achievement and, in some cases, non cash
benefits. However, unlike other income generating assets a business may be free
of Capital Gains Tax (CGT) when it is sold.
an operational business sells for less than five million dollars and is owned
by an individual, partnership or a company, where an individual owns at least
50% of the business, or shares in the business, the Capital Gains Tax liability
will be halved. If the owner qualifies for this 50% reduction and has owned the
business for more than 15 years, the sale will be free of Capital Gain Tax.
a business is owned by individuals (not a company) for longer than twelve
months, but less than 15 years, the Capital Gains Tax liability will be reduced
by a further 50%. The debt would now only be 25% of the original liability.
the concession and discount is applied and the liability is established it can
still be eliminated if the operator is over 55 years of age, if the gain is
transferred to a complying superannuation fund or if the operator reinvests the
gain in another business within two years of the sale.
the event that a CGT liability is created involuntarily it may also be exempt.
For example if it is as a result of a marriage breakdown, a compulsory
acquisition or as a result of an insurance payout.
that is considering the purchase of a small business should establish an exit
strategy before they even buy the business. The CGT legislation is so generous
in favour of small business that any business owner who is well advised and
uses an appropriate business structure should never have to pay Capital Gains
Tax on the sale of their business.
buying, or selling, a business talk to one of the team of professionals at
Raine and Horne Business Sales who can assist you with your sale or acquisition
to ensure you of the best possible outcome.
Simon is Principal of Raine & Horne Business Sales. He has over 20 years’ experience as a business broker and has sold over 350 businesses throughout South Australia and the Northern Territory. Simon is a Certified Practicing Valuer and as a member of the Australian Property Institute and specialises in going concern business valuations. He is also qualified as a Certified Practising Accountant, holds an Economics Degree, a Post Graduate Diploma (Property) and a Masters Degree in Business. Simon was the Real Estate Institute of South Australia’s Business Broker of the Year in 2005, 2008, 2011, 2012, 2013, 2014, 2015, 2016 and 2016 as well as the Real Estate Institute of Australia's Business Broker of the Year in 2013, 2015 and 2016.