Are you considering selling or restructuring your business in the future? If so, you may be eligible for the Small Business Capital Gains Tax Concessions (‘the Concessions’). When applied correctly these concessions can result in a very tax-effective outcome.

The following case study illustrates how we helped one client make the most of the concessions and the proceeds from the sale.

Background

Our client successfully operated a professional services business for over 20 years. When the time came for them to part ways with their ‘nest egg’, they approached us to determine the tax and financial consequences of the sale.

What we did

Review

As part of our engagement, we conducted a detailed review of their situation to determine their eligibility for the SBE CGT concessions, identified the concessions they were eligible for, and provided practical advice to guide them the action items to access the concessions in preparation for their sale.

Confirm Eligibility

Considering their capital gain was more than $2m, correctly applying the concessions could drastically change the associated liability, and how they could use these proceeds.

After confirming their eligibility, we then reviewed which concessions they would be best to use considering their goal, which was to enter retirement.

Tax Free Gain

The concessions we identified could allow the client not only to exempt the entire gain from tax but also the ability to contribute these proceeds to superannuation without any tax consequences. These proceeds could be contributed in a way that they could get more into their superannuation than would normally be possible under the annual concessional and non-concessional caps.

Financial Plan

Having worked through the process of applying the SBE CGT concessions, our wealth team developed a comprehensive retirement plan for the client. This plan utilises the proceeds contributed to their superannuation fund and provides them with an income stream for their retirement.

Outcome

The engagement successfully achieved the following outcomes for the client:

  • Our client knew of their position before the sale, allowing them to plan their affairs;
  • Accessing the SBE CGT concessions, saved approximately $660,000 in tax, and allowed them to contribute approximately $2.2m to superannuation (tax-free);
  • The client has the peace of mind that they have a secure, income generating asset in their superannuation that will set them up comfortably for their retirement.

How we can help you

Determining your eligibility, and accessing the concessions, can be a complex process. We are experienced in assisting clients in accessing the Concessions so that more cash ends up in your pocket on the sale of your business. Furthermore, through our wealth services, we can help you make the most of any gain you receive from the sale of your business.

It is never too early to get in touch. Often we can identify opportunities and put strategies in place well before the eventual sale that may save you considerable amounts in tax in the future.