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The opportunities of Small Business CGT Concessions & SMSFs

Apr 15, 2021, 12:22 PM
By Nicholas Ali
Executive Manager, SMSF Technical Support

SuperConcepts Author – Anthony Cullen
Four years on from the 2017 superannuation reforms that transformed the industry, confusion still exists on using the CGT concessions for small business. We’ve certainly seen this to be the case when talking to SMSF professionals and from the questions we receive.  When advisers don’t have a proper understanding of what clients can and can’t do, they run the risk of not only missing out on opportunities to maximise their client’s SMSF balance but also having to unwind the contribution and incurring excess contributions tax.

One of the key changes of the reforms was the reduction in concessional and non-concessional contribution caps and indeed the ability to make non-concessional contributions if a superannuant has $1.6m or more counting against their Total Superannuation Benefit (TSB).

However, the small business CGT concessions (if accessible), gives SMSF members the opportunity to contribute additional amounts to superannuation outside of the restrictive contribution cap rules.

In fact, a member’s TSB does not preclude them from making small business CGT contributions of up to $1,565,000 to their SMSF. Even better, the contribution will be considered a tax-free component of any pension commenced, subject to the recipient’s Transfer Balance Cap (TBC).

What amounts qualify under the lifetime CGT cap?

There are two small business concessions that can count against the lifetime CGT cap for retirement purposes - the 15-year CGT exemption and the retirement exemption. It is important to understand how these amounts qualify.

Using the small business CGT concessions for retirement purposes not only saves paying tax, but it can significantly boost superannuation savings. This can help members top up their retirement savings - especially if they have made irregular contributions during their working life. 

In the last few years, legislative changes and a raft of eligibility criteria has made it difficult for advisers to determine with certainty if their clients qualify for these concessions.  To give some clarity, these eligibility issues as well as strategies to use the concessions are addressed in our next SMSF Masterclass series starting 27 April.  It’s just one webinar of a 3-part series that takes a look at the small business strategies SMSFs can use. 

Read more about the Masterclass Series here or register now and qualify for our 2-for-1 limited offer (until Friday 16 April).