Super Strategies – convert business capital into tax-free retirement benefits

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If you’re selling your business to retire, taking advantage of the CGT small business concessions could enable you to manage tax and get more money into super.

HOW DOES THIS STRATEGY WORK?

To use this strategy, you need to sell ‘active business assets’ and meet a range of other conditions.

Active assets are assets that are held or used in the course of carrying on your business or a business of someone else connected with you. Generally, this might include land and buildings and in limited circumstances, shares in the company.

If you have held the active business assets for 15 years or more, you may be eligible to claim the 15 year CGT exemption. It could enable you to disregard 100% of capital gains made when selling business assets and contribute up to $1.515 million to super by using the CGT cap. This cap may also be available when disposing of pre-CGT assets or assets where there is no capital gain.

In other circumstances, including where the active business assets have been held for less than 15 years, you may be eligible to use the CGT retirement exemption instead. This exemption enables you to disregard up to $500,000 in capital gains and invest up to $500,000 of exempt gains in super under the CGT cap.

OTHER KEY CONSIDERATIONS

  • If you are eligible and want to make a contribution into super and have the contribution count towards the CGT cap, you must provide your fund with a ‘CGT cap election’ form in the approved format at the time or prior to making the contribution.
  • If you’re under age 55 and want to claim the CGT retirement exemption, you will need to invest the CGT exemption amount in super to qualify for the CGT concession. Also, you won’t be able to access the money until you meet certain conditions.
  • If you plan to retire and are eligible to access your super, you might want to use up to $1.6 million to start a retirement phase income stream investment. By doing this, no tax will be payable on earnings in the fund, you can receive a tax-effective income under age 60 and all income payments received at age 60 or over will generally be tax-free.
You should consult with a registered tax agent to determine the CGT implications, whether the small business concessions will be available to you and which ones should be claimed.

Your Westlawn Financial Adviser can help you to:

  • maximise your super contributions
  • unwind or reassign business insurance policies, such as those used to fund a Buy Sell agreement
  • pay-off business loans and release guarantees
  • review your personal insurance needs to ensure you are suitably covered, and
  • facilitate, with legal advice from your solicitor, any estate planning changes that may need to be made.

Contact us today:

 

Source: MLC (National Australia Bank Limited ABN 12 004 044 937, AFSL 230686)

General Advice Disclaimer
All of the material published on this website is for information purposes only and does not constitute advice. This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a Financial Adviser, whether the information is appropriate in light of your particular needs and circumstances. Westlawn Wealth Management Pty Ltd ABN 32 124 861 409 Corporate Authorised Representative of Affinia Financial Advisers Limited ABN 13 085 335 397 AFSL No. 237857. Please note that Affinia Financial Advisers Limited is not responsible for the advice and services provided by Westlawn Finance Limited, Westlawn Insurance Brokers Pty Ltd, Westlawn Life Insurance Pty Ltd or Westlawn Business Services Pty Ltd.

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