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Here's why the phrase "honey, here's half my company" won't cost you Capital Gains Tax

by , 24 June 2014
Capital Gain Tax comes into play anytime your company makes money. This can happen through sales or through disposal of an asset.

But there are situations when you won't pay tax on capital gain. Like if you decide to give your spouse part of your business.

Read on to find out why this transaction is totally tax free.

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Reorganising or restructuring your company doesn't trigger Capital Gains Tax

 
 
- Run your business as a sole proprietor but want to set up a company or closed corporation;
- Do a share swap when you want to introduce a holding company;
- Dispose of an asset by giving it to another company as long as it falls under the same group as you; and
- Dispose of all your company's assets to another company through an amalgamation, conversion or merger.
 
These reorganisations all happen inside your company structure and so no tax issues arise. But what about external reorganisation and CGT? In most cases CGT will apply here. But there's one kind of external reorganisation you can that won't trigger CGT.
 
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Give your spouse part of your company and don't pay Capital Gains Tax

 
You can reorganise your company by transferring part of your company to your spouse (who's an external party). This is the only kind of external reorganisation you can do that won't trigger CGT.
 
All that'll happen here is your spouse will take over the base-cost of the asset. This may be an external; type of reorganisation, but because you don't get more money from the transaction you don't have to pay tax on it. 
 
So if you want to give your spouse half your company, you can do so, without the fear of massive Capital Gains Tax.
 


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