Q. We own a commercial property in country Victoria. There are two shops and 5 storage garages. I do all correspondence, invoicing, negotiate the leases, collect the rent, manage the accounts and complete general maintenance. We have held the property for approx. 14 years. Would this qualify as a small business allowing us to take the 15 year exemption and be a CGT-free sale ?
A. You refer to the 15 year exemption, which is one of the four CGT small business concessions. Under this exemption the entire capital gain realised on disposal of a CGT asset is exempt from tax if you satisfy the conditions under Subdiv152-B.
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Tags: 15yr tax exemption | CGT | CGT Small business concessions | Tax strategy and structuring
Posted in Business Scruples (Q&As) |
Q. I run a small restaurant in partnership with my sister. Recently we took in a 3rd partner. Are there any CGT implications? We do not have any assets in the partnership except plant & equipment and goodwill. I understand that there is no CGT on plant & equipment and goodwill.
A. When a new partner is admitted to the partnership, the existing partners effectively dispose of an interest in the partnership and the new partner acquires an interest. For CGT purposes, the new partner acquires a share of each partnership asset and the existing partners are treated as having disposed of part of their interest in each partnership asset, s106-5(4) of the ITAA 1997. This means you and your sister will dispose of a fractional interest in the business goodwill and plant & equipment.
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Tags: CGT | Tax strategy and structuring
Posted in Business Scruples (Q&As) |
Q. We’re planning to sell our business. Should we have a valuation completed in advance of the sale to support our asking price? Will this give our sale price greater credibility in the market, if it is supported by an independent valuation?
A. An independent valuation opinion is a valuable piece of information if you are looking to establish your sale price and you are unsure of what a fair market price is for your business. However if you are clear on the price for your business, it is less valuable as a support tool to convince a prospective purchaser. In most cases a purchaser will want to obtain their own independent valuation. Their reluctance to accept a valuation commissioned by the vendor will be a concern that you may have influenced the valuation in some way or that it is a valuation opinion, ‘friendly’ to the vendor.
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Tags: Business valuation & appraisal | Succession planning & sale of business
Posted in Business Scruples (Q&As), Infotelligence |
Q. We have recently completed our end of financial year management accounts. We expect there will be additional adjustments still to flow through before we finalise them. We are fairly busy at the moment with current year work and would prefer to leave the wrap up of our financial statements until later this year. Our accountant is pushing us to finalise some of these end of year adjustments. Why all the rush?
A. This is probably a good question to ask your accountants. They would have a better idea of your reporting requirements. Your tax returns certainly will not be due until later in the year or next year. The exact date depends on your entity structure, your size and your past tax history. There are however other reasons why you may need to complete your financial statements at an earlier time.
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Tags: ATO Audit | BAS | End of Year Reporting | Tax & accounting compliance | Tax strategy and structuring
Posted in Business Scruples (Q&As), Infotelligence |
Q. I read your recent comments on the CGT small business concessions on the sale of a business. We are in the final stages of negotiations and expect to go to contract next month. Our problem is that we probably don’t qualify for the concessions based on the maximum net asset test of $6 million. We’re not over by a lot but I think we are over. How tightly is it tested?
A. This is an area that you need to be careful with and where a lot of SMEs are coming unstuck. The ATO are quite active in checking the maximum net asset test where a business claims the CGT small business concessions. This test is one of the basic conditions for relief under s.152-10 of the Tax Act. It is tested at the time of CGT event, and if you fail this test then you are not eligible for the concessions unless you are a small business entity with turnover less than $2 million per annum in which case you do not need to satisfy the maximum net asset test.
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Tags: CGT | CGT Small business concessions | Tax strategy and structuring
Posted in Business Scruples (Q&As), Infotelligence |
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