CGT small business concession win

CGT small business concessions

The ability to make contributions under the CGT small business concessions has been broadened due to new legislation governing contributions.

The ability to take advantage of the capital gains tax (CGT) small business concessions will be improved after 1 July as a result of recent legislation passed in Canberra amending the superannuation contribution rules, a technical manager has said.

“The benefit of this for people older than 67 [who sell their business] is that if you want to get this amount they get for the small business [CGT] concessions into their superannuation fund, they now don’t need to meet the work test to be able to put the small business amount into the superannuation fund,” SuperConcepts SMSF technical and private wealth executive manager Graeme Colley noted.

“That’s a real bonus because we do see clients wanting to put the capital gains tax amount [into their super fund], which could be up to $500,000.”

However, regardless of this advantage arising from the change in legislation, Colley warned SMSF members will still have to get the timing of these contributions right so as not to jeopardise any other avenues they want to use to allocate more money to their super funds.

“[For example] if the individual [got to use] the CGT small business amount in May 2022, he might want to delay that until after 1 July simply because he might want to make additional contributions in the 2022/23 year,” he said.

Specifically, he pointed out if an individual contributed the CGT small business amount into the SMSF in May 2022, the money may push the person’s total super balance beyond a particular threshold, which will in turn compromise any other contribution plans.

For instance, if a small business CGT contribution was made in May 2022 and resulted in the member’s total super balance exceeding $1.7 million, no non-concessional contributions would be allowed in the 2023 financial year.

The legislation scrapping the need for Australians up to the age of 75 to satisfy a work test before they can make non-concessional contributions to their super fund received royal assent in February.

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