The Small Business CGT Exemption After Death

Under capital gains tax laws, if your business has continuously owned an active asset (i.e. business asset) for 15 years, you’re aged 55 or over and are retiring or permanently incapacitated, you may be able to sell the asset including the goodwill and not pay Capital Gains Tax. There are a number of tests to satisfy, but if satisfied then it is quite possible that any capital gain would be tax free.

Though, what will happen upon death?

Fortunately for your spouse or children, the assets will still be eligible for the 15 year exemption to the same extent that the deceased would have been just prior to their death. Also, there some additional concessions and requirements as the assets are being sold after the death of the business owner.

  • Firstly, it is probably obvious that the sale cannot be as a result of a retirement as it is resulting from death. As such, the rules are relaxed in that the sale does not need to be in connection with the retirement of the deceased
  • However, as a restriction, the deceased needs to have been 55 or older immediately before their death, rather than at the time of the sale, in order for the estate to benefit from the CGT exemption
  • The asset is disposed of within two years of the date of death (although the ATO may allow a longer period by granting an extension of time), and
  • The asset would have qualified for the small business CGT concessions if the deceased had disposed of the asset immediately before their death.

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