Members Voluntary Liquidation and the Small Business CGT Tax Concessions
I explained few weeks ago in a blog that the main reason for doing a Members Voluntary Liquidation, rather than the much easier Deregistration, was to obtain pre-CGT Tax Benefits and Small Business CGT Concessions. I thought it worthwhile to explain in more detail the Small Business CGT Concessions and then we explain the significant benefits of a Members Voluntary Liquidation in getting the proceeds of an asset sale to the shareholders.
What are the Small Business CGT Concessions for your business?
There are four types of CGT Small Business Concessions:
- Small business 15-year exemption
- Small business 50% active asset reduction
- Small business retirement exemption
- Small business rollover
It is easiest to understand the concessions by looking at a flowchart:
You should obtain advice from your tax accountant to see if you qualify and meet all of the conditions. But in general, where a company is eligible to apply for the first two types of concessions above, part or all of the capital profits arising from a CGT event may be exempted from tax at the company level. Note that the above only applies to the distribution of the capital profits. If your company has retained earning (which is also subject to distribution), the amount will be deemed dividend and taxable.
You should discuss the sale of your business with your tax accountant to see if you will qualify for the Small Business CGT Tax Concessions and if so, you should then contact us to receive the extra tax benefits received through a Members Voluntary Liquidation.