Small business CGT concessions a continued missed opportunity for SMSFs

“In the last few years, legislative changes and a raft of eligibility criteria have made it difficult for advisers to determine with certainty if their clients qualify for these concessions,” Mr Ali said.

“When advisers don’t have a proper understanding of what clients can and can’t do, they run the risk of not only missing out on opportunities to maximise their client’s SMSF balance, but also having to unwind the contribution and incurring excess contributions tax.”

One of the key changes of the reforms was the reduction in concessional and non-concessional contribution caps and indeed the ability to make non-concessional contributions if a superannuant has $1.6 million or more counting against their total superannuation benefit (TSB), according to Mr Ali.

However, he noted the small business CGT concessions (if accessible) gives SMSF members the opportunity to contribute additional amounts to superannuation outside of the restrictive contribution cap rules.

“In fact, a member’s TSB does not preclude them from making small business CGT contributions of up to $1,565,000 to their SMSF,” he said.

“Even better, the contribution will be considered a tax-free component of any pension commenced, subject to the recipient’s transfer balance cap.”

Mr Ali said there are two small business concessions that can count against the lifetime CGT cap for retirement purposes: the 15-year CGT exemption and the retirement exemption. 

“It is important to understand how these amounts qualify,” Mr Ali said. “Using the small business CGT concessions for retirement purposes not only saves paying tax, but it can also significantly boost superannuation savings.

“This can help members top up their retirement savings, especially if they have made irregular contributions during their working life.”