Small business owners preparing for retirement are missing out on contributing additional amounts into superannuation to which they may be entitled when selling a business.

The latest statistics from financial information provider S&P Capital IQ’s global database highlight that in the last financial year almost 400 businesses with a market capitalisation of up to $20 million were sold in Australia.

It is estimated 70 per cent of business owners who satisfy the capital gains tax small business concessions are unaware that when they sell a business, there are opportunities to place substantial funds tax free into their superannuation account. This also applies if their businesses are pre-CGT (that is, acquired/commenced before 19 September 1985). 

Eligible individual business owners may be entitled to place up to $1.355 million into a super fund tax free when this business transaction occurs, while joint couple owners can deposit up to $2.71 million. It is imperative planning is undertaken well before the sale occurs to ensure maximum contributions to super can be made.

Super contributions from a business sale using CGT small business concessions need to be made prior to the age of 75 and within certain timeframes. For example, contributions under one of these concessions needs to be made the later of 30 days after the capital proceeds are deposited or when the tax return is lodged the year the business sale occurred. No tax is payable if the relevant rules are followed. 

Many business owners focus solely on the sale, and fail to review where their funds should be placed post-sale to ensure the best financial position for their retirement.

Super is one of the most tax effective structures that can be used to ensure a strong financial future. It is imperative business owners plan ahead, especially if the age of 75 is looming.

Many business owners cannot capitalise on super tax advantages because they find out about them too late. Timely planning can help ensure a comfortable financial life during retirement.

Four areas to consider when selling a business to gain maximum super advantages include:

1. Determine whether the small business CGT concessions are available in the individual’s circumstances, as this may provide eligibility to access additional super contribution caps.
2. Consider building wealth in a super fund to prepare for retirement. 
3. The Australian Tax Office has strict rules governing super funds and the sale of businesses. Check how these rules impact you.
4. Plan ahead to ensure full financial benefits are obtained.

Read more: http://www.brisbanetimes.com.au/small-business/franchising/how-to-sell-your-business-taxfree-20141118-3kksj.html#ixzz3JQ74j6fr

Photo: Glenn Hunt