If you are thinking of selling your business, make sure you get professional business advice first.
For the majority of small-to-medium-sized business owners, the value of your business is your biggest asset and, very likely, your retirement fund. So before selling your business make sure you get the right advice. It could save you thousands in tax.
Upon the sale of your business it is critical you receive the maximum available net proceeds. However, many taxpayers miss this once in a lifetime chance through poor transaction planning and the holding of assets in inappropriate structures. Just because you consider yourself a small business does not mean you have automatic access to all available CGT concessions.
While the rules are complex, if the correct planning is in place, a husband and wife team have the ability to receive up to $4 million tax-free after the sale of their business. (If you’ve run your business for at least 15 years, all the sale proceeds might be tax-free!)
Key considerations when selling your business
- Companies do not receive the 50% general discount
- The owner/s need to have owned the business/asset for more than one year – CGT discount 50%
- Taxpayer group:
- Must be under $6 million in net value, or
- Under $2 million turnover threshold
- Any assets sold must be ‘Active Assets’ (used in the business for a certain period)
- To maximise the concessions, the business owners might need to use the Retirement Exemption, rolling up to $500,000 per individual of their sale proceeds into superannuation.
Effective planning for the sale of your business can make a huge difference to your after-tax return – up to $4M
Here is an example:
A client approached us with a plan to sell their business in two years’ time. The business was owned in a company structure and because the client had time on their side, we were able to implement a solution to ensure all considerations were met. Below is a comparison study showing the change in the client’s net result, assuming the final capital gain is paid out to an individual from the company.
This advice resulted in a TAX SAVING of $337,500.
Without expert advice, results like this may not be achieved. There are two very common explanations why business owners miss these generous tax concessions, these being:
- You leave it too late to inform your advisers about your intention to sell; or
- Your advisers do not have a thorough understanding of the legislation and the possible restructuring opportunities.
As taxation specialists, our focus is on providing the best possible outcome for business owners.