Small business owners who are planning on selling their business or business assets and using the proceeds towards superannuation free of capital gains tax (CGT) need to be aware of the recent changes to concessional and non-concessional caps, the SMSF Association said.
The association warned that even though the small business CGT cap rules had not been changed recently, such a move could have huge impact on their superannuation.
In general, the small business CGT cap allowed the capital earned on the sale of any small business asset up to $500,000 per taxpayer to be contributed to superannuation free of CGT or in case of the assets that had been held for more than 15 years the threshold would rise to $1.415 million for the 2016/17 financial year.
SMSF Association head of technical, Peter Hogan, said that once this tax-free contribution was placed in an SMSF using the CGT cap, these amounts counted as part of a member's total superannuation account and were assessed accordingly in terms of eligibility for catch-up concessional contributions.
"So, although the small business CGT cap has been left alone by the legislation, small business owners need to carefully assess the impact of making such a contribution on the sale of a business or business asset," he said.
"Ideally, any small business contribution should be made after any other contribution, especially where the small business CGT contribution will push account balances over the various account thresholds."
He also encouraged small business owners to get advice from an SMSF specialist on how to maximise, in these circumstances, their retirement savings and the tax effectiveness of their SMSF.