For many small business owners, the eventual sale of their business represents a significant financial milestone. But what often catches sellers off guard is the capital gains tax (CGT) bill that comes with it. Fortunately, Australia’s tax system provides generous CGT concessions for small business owners, helping them keep more of their hard-earned wealth.
One of the most powerful tools available is the Small Business Retirement Exemption, which allows eligible business owners to reduce or even eliminate CGT when selling a business asset. This exemption can be particularly useful for those looking to bolster their retirement savings.
Who Qualifies?
To access small business CGT concessions, your business must meet certain criteria, including:
✅ Having an annual turnover of less than $2 million OR net business assets under $6 million
✅ The asset being sold must have been used in the business for at least 15 years (for the 15-year exemption) or meet active asset requirements
✅ The owner must be under 55 and contribute the exempt amount to super, or if 55 or over, they can take the amount tax-free
How Does the Retirement Exemption Work?
Under this exemption, business owners can exclude up to $500,000 in capital gains from tax over their lifetime. If the owner is under 55, the exempt amount must be contributed to their superannuation fund, ensuring the proceeds support their long-term retirement goals.
For those over 55, the exemption can be taken as a lump sum, tax-free, without needing to contribute to super. This makes it an attractive option for business owners looking to transition into retirement while maximising after-tax proceeds.
Why It Matters
These CGT concessions can significantly reduce the tax burden on a business sale, helping owners retain more wealth for their next venture or retirement. However, the rules are complex, and structuring a sale to maximise these benefits requires careful planning.
If you’re thinking about selling your business in the coming years, it’s essential to speak with your SWU Group tax adviser to ensure you’re positioned to take full advantage of these concessions. A well-planned exit strategy can mean the difference between a large tax bill and a comfortable retirement.
Want to explore how these concessions could work for you? Get in touch today: financialsuccess@simonwu.com.au