CGT small business contributions – they keep on smiling

By Tim Miller
(Miller Super Solutions)

Whenever there is tax reform there are winners and losers and of course there are those that remain unaffected.  Small business owners may lose out on the ability to make higher concessional contributions but they certainly haven’t lost their smile with regards to using the existing small business concessions to make contributions to super.

As is now law, effective from 1 July 2017, non-concessional contributions are no longer subject to the fund-capped contribution rules rather they are subject to Total Superannuation Balance requirements, meaning an individual will need to have an understanding of all their superannuation balances prior to making an after tax contribution.  Individuals with a total super balance greater than $1.6m will be precluded from making non-concessional contributions and those between $1.4m – $1.6m will have limitations on using the bring-forward provisions. This annual test will at some point lose its novelty and people we get frustrated by their inability to make a contribution until all balance information is collected.

For small business owners, no changes were made to the ability to make contributions subject to the CGT Small Business concessions.  These contributions, will not be subject to a balance test but rather subject to the existing tests that apply such as whether the definition of a small business has been met and whether the asset sold to enable the contribution was an active asset. This means individuals will still be able to make $500,000 contributions using the retirement exemption and up to $1,415,000 (16/17) using the 15-year exemption, and importantly the timing is more flexible as there is no requirement to measure the balance at the previous 30 June.

What clients will need to be mindful of is that once the CGT contribution has been made to the fund, then that amount will form part of their Total Superannuation Balance so may result in an inability to make future non-concessional contributions, although if a non-concessional is made at the same time as the CGT contribution then the at least the CGT contribution will not have been included in the Total Superannuation Balance calculation performed at the previous 30 June.  It is also opportune to remind clients that the 15 year exemption relates to the proceeds of the sale whereas the retirement exemption only applies to the profit i.e. the amount subject to the Capital Gain.

So whilst not every cloud has a silver lining, there are still opportunities to contribute to super, even if those contributions are unable to be converted to a retirement phase income stream.


General Advice Warning:

The information provided is general in nature and represents the opinion of the author. It does not take into account the objectives, financial situation or needs of any particular person. It is not intended to be and does not constitute financial advice or any other advice.You need to consider your financial situation and needs and should seek professional advice before making any decisions based on this information.


Miller Super Solutions is the SMSF education & training creation of Tim Miller, assisting SMSF professionals and trustees with the practices associated with establishing, running and ultimately closing down SMSF’s.

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