15 Year Small Business CGT Exemption
If the 15 year small business capital gains tax (CGT) exemption applies then any capital gains on the sale of business assets will be entirely exempt i.e. 100% tax free.
As the whole gain is exempt there is no need to offset the gain with any current or prior capital losses before applying the 15-year exemption. This allows the capital losses to be carried forward and offset against other capital gains that are not eligible for the 15-year exemption.
The small business CGT exemptions can only apply if either the small business entity or the maximum net asset value test is passed. A small business entity is an entity that is carrying on a business and has less than $2 million aggregated turnover. The maximum net asset value test requires that the total net value of CGT assets owned by certain entities does not exceed $6 million just before the CGT event that results in the capital gain occurs.
The requirements for the 15 year exemption to apply for an individual are:
• The individual continuously owned the CGT asset for the 15 year period just before the CGT sale.
• At the time of the CGT event, the individual was at least 55 years of age and the event happened in connection with their retirement.
If the entity is a company or trust then to access the 15-year exemption the entity must have a significant individual for a total of at least 15 years during which the entity owned the asset (and the individual who was the significant individual just before the CGT event retires or is permanently incapacitated). An individual is a significant individual if they own at least 20% of the entity or have an ownership interest in the entity and are a spouse of a significant individual.