Planners should carefully consider tax before selling
Financial planning practice owners should take careful consideration of capital gains tax (CGT) before selling their businesses, according to HLB Mann Judd Sydney tax partner Peter Bembrick.
Bembrick warned that owners could end up with less than expected from their sales if they did not properly deal with tax considerations when preparing to sell. He stated that business owners expected to be able to claim small business CGT concessions.
“However, it is an area that the [Australian Taxation Office] is paying close attention to at the moment, so it’s important to take care to ensure that all the requirements are met, otherwise, owners could receive a significant tax bill at the end of the sale,” Bembrick asserted.
He said business owners should think about six key concerns, which included: whether it was the company or business assets that were being sold; whether the business met the basic conditions of claiming for small business CGT concessions; whether small business grouping rules were being applied correctly; how shares were being sold; whether the business premises were being sold separately to the actual business; and what the sale proceeds would be used for.
Bembrick pointed out that selling shares in a company allowed shareholders to claim the 50 per cent CGT discount, adding that it could also help maximise the benefits of the small business CGT concessions and possibly result in the sale of a business being tax-free.
However, he noted that there were “common traps” when selling shares that worked against those small business CGT concession claims and grouping rules.
In terms of selling the premises separately, Bembrick said small business CGT concessions could be used separately for each sale, which he added could help maximise the sale proceeds.
Bembrick said for those aged under 55, the small business CGT concessions could usually be maximised by putting some of the sale proceeds into a super fund, while reinvesting some of the proceeds into a replacement business or business structure could also be helpful, he added.
Recommended for you
With HNW investors representing the largest market for alternative assets, Praemium and CoreData research underscores why this presents a compelling opportunity for advisers.
Having completed the successful integration of Diverger, Count has upgraded its forecast for expected synergy benefits achieved by the acquisition by a third.
Australia’s largest licensee has seen the biggest number of adviser losses over the past week, while the expected wave of new entrants has boosted overall adviser numbers.
Iress has increased its forecast adjusted EBITDA by $5 million for the 2023/24 financial year in light of the sale of its platform business to Praemium and hinted at a return to dividend payments.