While each small business owner’s situation will differ, all will need to factor in how time will play a role.
In the world of small business, timing is incredibly important for success. When you are planning to exit your business, getting the timing right is critical to maximising your financial position.
Whether selling a business to another party or handing over ownership or management to younger family members, there are many complex financial, structural and operational aspects to consider. In cases like these, current owners may decide to complete a partial sale or ownership transition, to help the new management deal with the challenges at hand while waiting for conditions to potentially improve.
As the name suggests, owning your business for at least 15 years is key to the 15-year exemption, as is being aged 55 or older and the sale being connected with your retirement. The 50 per cent active asset reduction allows you to treat 50 per cent of the capital gain as tax-free, meaning you are taxed only on the remaining half.
Here’s an example of how this works in practice: a couple, aged 60 and 61, sold a family business for $5 million which they bought for $1 million 10 years ago.
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