Small Business Cgt Concessions – 1 Guide for Small Business Operators High-level guidance on capital gains tax relief for small businesses For more information visit ato.gov.au NAT
2 Our commitment to you We are committed to providing accurate, consistent and clear information to help you understand your rights and entitlements and to meet your responsibilities. If you follow our information in this publication and find it to be incorrect or misleading and incorrect, we must still apply the law appropriately. If you owe us money, we’ll ask you to pay it back but we won’t charge you a penalty. Also, we won’t charge you interest if you act fairly and honestly. If you make a mistake in trying to follow the information in this publication and you owe money as a result, we will not pay you. However, we ask you to pay and we may charge you interest. Correcting a mistake means we pay you, which we pay you. We will pay you any interest you are entitled to. If you feel that this publication does not fully describe your situation or you are not sure how it applies to you, you can ask us for further assistance. We regularly update our publications to reflect any changes in the law, so make sure you have the latest information. If you are unsure, you can check the latest information on our website at ato.gov.au or contact us. This publication about this guide was published in June. This guidance applies to events occurring in the sales tax (CGT) income year. Do not use this guide for CGT events in previous years, as the information may differ. See key aspects of capital gains tax (CGT) in previous editions of this guide. This guidance explains the CGT relief available to small businesses contained in section 152 of the Income Tax Assessment Act 1997 (ITAA 1997). These discounts apply to CGT transactions occurring after 11.45am Australian Capital Territory Standard Time on 21 September. It does not specify how the guidance applies to a consolidated group of entities. When we say you or your business in this guide, we mean that you are running a small business: as an individual (as a sole trader) and as a partner in a partnership with a company or trust. Australian Tax Office Australia, 2013 You are free to copy, adapt, modify, distribute and distribute this material at your discretion (but in no way implies endorsement by the ATO or the Commonwealth or any of your services or products. ). Issued June 2013 JS 28998 by the Australian Taxation Office Canberra
Small Business Cgt Concessions
3 Contents Changes in recent years 3 01 About Capital Gains Tax 4 What is Capital Gains Tax? 4 02 About CGT reliefs 5 CGT reliefs 5 Small business reliefs 5 03 How do you use losses, allowances and reliefs? 6 Using capital losses 6 Using reliefs and allowances 6 Choosing small business reliefs 8 04 Basic terms for small business CGT leases 11 Basic terms for small business CGT reliefs 11 Small business corporation 11 Small business corporation 11 How to check your small business return 12 12 Reserve assets 14 Partners in a Partnership: Using the Small Business Entity Test 15 Multiple Asset Value Test 17 Who Are Partners? 20 When the entity is linked to you 23 Effective asset test 27 Additional circumstances if the CGT asset is a share or trust interest 34 CGT relating to the contract 34 Significant individual test 35 90% test Small business 15 year exemption 39 Interaction with other exemptions 39 Using this exemption you 39 Small businesses must complete the results 43 The Private Guide to Capital Gains Tax Relief.
Government “overshoots” Small Business Concessions
4 Contents 06 Small business 50% deduction of current assets 44 Interaction with other exemptions 44 Fulfillment of conditions 44 Consequences of availing deduction 44 Fixed trust provision and 50% deduction of working assets. 47 Termination of employment not required 49 Dividends taken 49 Capital gains realized by installments 50 Maximizing benefits you do not need 50 CGT exemption limit on superannuation 51 Small business with consequences of electing exemption 53 Interaction with basic terms 53 Interaction with other options for electing terms 53 54 Other CGT matters Death and Business small CGT 58 Assets and death 58 Liquidation of assets after statutory period of two years
5 changes in recent years Changes to small business CGT reliefs in recent years make it easier for you to find out whether you qualify for relief. You will find the most recent amendments in the Taxation Laws Amendment (Act No. 9 of 2011) Act 2012, which received Royal Assent on 21 March. The amendments generally apply to CGT events occurring in subsequent income years. In this guide we refer to these revisions as the March 2012 revision. The amendments have changed the calculation of the percentage of small business participation: the calculation of the voting power of joint owners of n shares no longer applies to the percentage of participation. A firm’s small business in a trust is greater than the zero that would occur, where the trust does not operate. Supply in a CGT program year as there is no tax loss or net income for the year. As the March 2012 amendments are retrospective, you have extra time to prepare your tax return to apply the pre-assessed amendments before these amendments are introduced (22 March 2012, the day after Royal Assent). Not later than 22 March 2014 (two years from the date of commencement) or such later date as may be permitted by the Commissioner of Taxes. You can find further amendments in the Taxation Act Amendment (Regulation No. 2 of 2009) 2009 which received Royal Assent on 23 June. This date will be after the election deadline. They apply to: n payments and CGT events or CGT events after 23 June 2009 and in subsequent years. We have included them in this version of the guide. Information on changes to the Capital Gains Tax (CGT) Agreement is available for additional changes for short business years. They apply to payments and CGT events occurring on or after 23 June 2009 and the changes include: making certain loans to reduce the value of a unit’s assets using property value assessments up to £6 million to ensure all use of the asset (except for certain personal uses and certain uses which (takes away passive income) provision for exempt payments to offset side effects by ensuring pension exemptions when deciding what is the best use of CGT pension exemptions. For small business premises. The following amendments were announced in Budget 2008 and will apply to CGT events and income in later years, including for small businesses making CGT-exempt exemption payments to intermediary entities affected by the assessment of capital allowances in section 109 and section 7A section 109C. Income Tax Assessment Act. The changes extend access to CGT relief for small businesses with a turnover of less than £2 million: n A taxpayer who owns CGT assets used in the business by a joint or connected entity (tangible assets) and a partner. I – own CGT assets used in the partnership business (partner’s assets). Other minor changes improve the effectiveness of exemptions: the treatment of acquired capital by expanding the conditions and purposes under which a spouse under 18 or a child under 18 is considered a member of an individual and modifying the side effects of retirement exemptions. in installments. The following changes apply in relation to CGT events occurring in subsequent income years: n Extend access to reliefs for joint tenants and trustees of testamentary trusts where income arises from the estate within two years of the deceased’s death. They are entitled to concessions to remove the requirement in the superannuation exemption to meet the original condition that the changed asset conditions do not reach the rollover of small businesses (CGT events J5 and J6). As the changes are retrospective, you have additional time to make your choice to use the discounts to which you are entitled as a result of the June 2009 amendments.
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