08 Nov 2016

Small Business Tax Concessions

Consider Rachel’s Case

Rachel, 54, has been operating a primary production small business in the Macedon Ranges for 12 years. Rachel has decided to downsize and sell her farm. The real estate agent has estimated it will be able to be sold for $1,000,000. She is wondering what the Capital Gains Tax (CGT) implications will be in her case.

As Rachel qualifies as a Small Business Entity (SBE), she is able to take advantage of the small business CGT concessions. Based on the purchase and estimated sale price the gross gain is $500,000.

As Rachel has held the property for greater than 12 months she is eligible for the general 50% discount prior to the application of the small business concessions.

Rachel may elect to use the Replacement Asset Rollover giving her the option in the next two years to roll over the gain into another small business asset. As Rachel will subsequently turn 55 she may then elect to use the Retirement Concession under which she is not required to contribute the amount into superannuation and there will be no tax payable on the gain.

The example can be demonstrated as below:

Sale price                                         $1,000,000
Purchase price                                $   500,000
Gross Gain                                       $   500,000
50% General Discount                 ($   250,000)
Sub-total                                          $   250,000
Retirement Concession                ($  250,000)
Net Capital Gain                                   Nil

Should you wish to discuss further please feel free to contact Andrew Marshall or Janine Orpwood on 5427 8100 for an initial consultation.


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