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Selling your small business? Here's how Capital Gains Tax affects you

by , 08 August 2014
Running a small business can be scary, especially when you invest all your money into it. A lot of people do this to try to build up retirement capital.

But then, there's Capital Gains Tax (CGT) that'll take a massive bite out of your retirement money when you sell the business.

If this is something you're scared of, I have good news: There are special concessions for small business owners when it comes to the sale of their business and CGT...


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SARS gives you an exemption when it comes to selling your small business

 
SARS does this to provide relief to small business owners that invest all their life savings into their business. 
 
It doesn't even matter if you hold the business directly or if it's a company, close corporation or partnership, you still qualify.
 
Here's what you need to know about this exemption.
 
Here's how this CGT exemption works
 
If you:
 
- Are a sole proprietor;
- Are part of a partnership and you withdraw from it;
- Have an entire direct interest in a company that consists of at least 10% of the equity of the company, and at the time of disposal you:
 
Held the asset for your own benefit (to generate retirement capital for example) for five years;
Were involved in the day-to-day running of the business and have reached the age of 55.
 
Then you qualify for this exemption!
 
This means you must disregard the first R900 000 or R1.8 million of any capital gain you make when you sell of your business. 
 
There you have it. While you can't escape CGT on the regular profits from your business, SARS will give you the ability to sell your business later without losing your retirement fund.
 


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