Running a small business is tough. You put your heart and soul and many years of hard work into it, so you deserve to get the best reward when you sell. Selling a small business can also be very challenging, complicated and an uncertain time. So too can retiring. Combine the two and you have a situation where early planning and advice is absolutely critical.

The earlier you plan for the sale of your business, the more value you are likely to gain. Selling a business can take up a lot of your time but so can addressing the day-to-day demands of running your business. Trying to do too much of both at the same time can mean you don’t manage either properly.

Manage Capital Gains Tax (CGT)

Fortunately, some significant capital gains tax (CGT) concessions may be available to help you achieve the best after-tax sale result.

The value of these concessions can have a major impact on the after-tax sale value of your business, so despite the complexity it is worthy of investigation.

When you do sell your business, you may be able to claim certain capital gains tax (CGT) concessions. For example, you may be able to disregard 100% of a capital gain made on the sale of your business if you:

  • Have owned the assets for a continuous period of 15 years or more
  • Are at least 55 years of age and
  • Are disposing of the asset for retirement purposes or are permanently incapacitated.

To be eligible for these concessions, you must, along with related entities, have annual turnover of less than $2 million and run a business, or have net assets of less than $6 million excluding the family home and any superannuation benefits.

Don’t be disappointed if you do not meet these conditions as there are other concessions that you may be eligible to use that could reduce or eliminate any taxable gain on the sale of your business.

Contributing to Superannuation

Typical of many small business owners that over the years they have pumped most of their profits back into expanding the business, reducing the overdraft or debt obligations and hence superannuation contributions have been limited or non-existent.

Fortunately, following the sale of your business, there are strategies that you may be able to use to get some or all of the sale proceeds into super and generate a tax-effective income to meet your living expenses in retirement.

Imagine selling your business, paying no CGT by contributing into superannuation and then commencing and income stream from your super fund and receiving a tax free and tax exempt income in retirement. It’s possible.

Depending on your circumstances, you may be able to contribute up to $1.355 million from the sale of your business into super in 2014/15. What’s more, the money won’t count towards the concessional or non-concessional contribution limits that would ordinarily apply when contributing to super.

Business owners in this situation should really be talking to an experienced and qualified financial adviser to help maximise their super contribution using the sale proceeds. Of course, they should also bring in their accountant and form a good team with their financial adviser to maximise the small business CGT concessions.

While boosting your super would be a top priority, there are a number of other issues you may need to address when it comes to selling the business and planning for retirement.

Let’s say there is an amount left over to invest from the sale proceeds that can’t (or shouldn’t) be put into super. Where are these proceeds to be invested? What is the best entity to invest these proceeds?

Once you sell your business don’t forget to update your Will and Estate Planning. If you have had a partner in the business with you, it may an appropriate time to unwind or reassign any business insurance policies, such as those used to fund a buy-sell agreement.

Building a “team environment” with an experienced and qualified financial planner, an accountant and a lawyer will achieve your best results in selling your business.




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David Watkins, has been providing advice to clients since 1987. He is a Certified Financial Planner, a member of the Financial Planning Association (FPA), and Superannuation Professionals Association of Australia (SPAA).Google Plus

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