Retiring from small business

Selling a small business can be a challenging and complicated. So too can retiring. So plan Early.

There are a range of things that may need to be addressed early on with the assistance of your accountant or solicitor.

Key examples include:

  • ensuring the financial accounts are in order
  • obtaining a valuation of the business
  • determining the potential tax implications if the business is sold
  • considering whether the business should be restructured before the offer for sale, and
  • preparing or amending the legal and/or other documentation to facilitate the sale.

Manage capital gains tax

When you sell your business, you may be eligible to claim certain capital gains tax (CGT) concessions.

For example, you may be able to disregard 100% of a capital gain made on the sale of your business if you:

  • have owned the assets for a continuous period of 15 years or more
  • are at least 55 years of age, and
  • are disposing of the asset for retirement purposes

Alternatively, if you don’t meet the above conditions, there are other concessions that you may be eligible to use that could reduce or eliminate any taxable capital gain on the sale of your business.

You should consult with a registered tax agent to determine the CGT implications, whether the small business concessions will be available to you and which ones should be claimed.

Maximise superannuation contributions

Following the sale of your business, there are strategies that you may be able to use to get some or all of the sale proceeds into super and generate a tax-effective income in retirement.

Depending on your circumstances, you may be able to contribute up to $1.395m from the sale of your business into super in FY2015/16. Furthermore, the money will not count towards the concessional or non-concessional contribution caps that would ordinarily apply when contributing to super.

You should consult your financial adviser and accountant to ascertain which small business CGT concessions will be claimed and help formulate a contribution plan that takes advantage of the available contribution caps.

Address other advice issues

While boosting your super could be a top priority, there are a number of other issues you may need to address when it comes to selling your business and planning for retirement.

For instance, you may need to:

  • decide where to invest sale proceeds that are not/cannot be contributed into super
  • unwind or reassign business insurance policies, such as those used to fund a Buy/Sell agreement
  • pay-off business loans and release guarantees
  • deal with business property that may (or may not) have been held in a self-managed super fund

You should consult your financial adviser in conjunction with legal advice from your solicitor for any changes that may need to be made to your estate planning.