What Happened?

We have recently dealt with a situation where two shareholders sold their shares in a company.  The shares in the company were purchased in 2000 and were held until the 2017 financial year.  The sale of the shares was for a significant amount more than the initial purchase price.

Potential Tax Consequences

The gain on the sale of the shares creates the potential for a large amount of Capital Gains Tax to be payable.  To avoid this we had a look at a number of concessions that could be applied to reduce the capital gain.

In this instance, we were able to apply the Small Business 15 year exemption.  This exemption is able to be applied based on a number of factors:

  • The company was a Small Business Entity
  • The shares in the business are considered an active asset
  • The shareholders were significant individuals in the company
  • Shares were owned continuously over 15 years
  • Shareholders were aged over 55 and sale was in connection with their retirement

The Result

The application of this exemption resulted in the gain being fully disregarded, with no tax payable on a transaction that had the potential to otherwise attract a combined tax bill of between $300,000-$400,000.  A fantastic result for the client!

If you have any questions about capital gains concessions available for small businesses, be sure to speak to our team at Rubiix.

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