If you own a business, the answer to this question is probably yes – you should be thinking ahead about how to sell it in the most tax-effective way.
Naturally, you’ll want to get the best possible price for your business, and ideally, pay the least amount of tax on the sale. In many cases, a well-structured small business can even be sold tax-free. But that doesn’t happen by accident – it takes planning.
We need to perform important checks each year to ensure that you’re in the best position to qualify for small business tax concessions when it comes time to sell.
One of those key checks involves identifying your connected entities and affiliates—in simple terms, the other businesses or structures you control or have influence over.
Why Does This Matter?
When calculating whether you meet the eligibility thresholds (like turnover and net asset value), your business and the turnover and assets of all your connected entities and affiliates must be considered and included.
The last thing you want is to go through the sale process only to discover that an overlooked entity pushes you over the threshold and disqualifies you from key tax concessions.
The good news is that with enough notice, things can be done.
A review can be conducted on how your entities are owned, and restructuring can be looked into if needed. How your spouse is connected for tax purposes could be changed, and in some cases, that alone can double the turnover threshold before tax concessions are affected.
Another critical step is to assess the market value of your assets, including personal ones.
If your total net assets approach the $6 million cap, strategies like contributing to superannuation or upgrading your main residence can be considered. Both could help you stay under the limit and save substantial tax when you sell.
But timing is everything. These kinds of strategies can often take years to implement correctly, which is why it’s so important to start planning well before you’re ready to sell.
If you’re considering selling your business down the road, let’s have a chat now so you won’t be caught off guard later. The end of the financial year is the perfect time to strategise for your business with the aid of an advisor – why not see how else we can help before 30 June?
We’re here to help.
Review our Accounting, Compliance & Advisory solutions HERE
Find out how we can help by booking in your tax planning session with us before the end of the financial year.
Want to know where to find small business concessions ATO information, try this link HERE
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