Friday 16 August 2013

How long should you keep you tax records?


SMALL BUSINESS CGT CONCESSIONS (SBCGT)


There is much debate over the benefits of holding on to a business’s tax records. Just last financial year, two of our long term clients reaped the rewards of keeping their tax records by taking advantage of the SBCGT concessions.

SBCGT CONCESSIONS


The SBCGT concessions allow you to sell your business with no capital gains tax, when you:
  • are over 55
  • are retiring
  • have owned the business for at least 15 years
  • have net assets under $6 million, or your turnover is under $2 million  
Note: This applies to individuals and also to companies and trusts, however these entities have to meet a few more eligibility conditions.


RECORD KEEPING REQUIREMENTS


The standard requirement for record keeping is five years.  However for capital gains tax, the situation is different.  Very simply, you calculate the capital gain as the difference between the amount you sold the asset for, less the purchase price.  Therefore, you must keep records to provide evidence of the purchase date and cost, no matter how long ago that may be.  Plus for SBCGT concessions, you must keep financial statements and income tax returns for each year of ownership.  The information found in these documents is required for eligibility tests.


So before you throw out those old business records, think twice and scan a copy.  With the total proceeds tax free, this simple act can help see you through to retirement.


The 15 year exemption is just one of the CGT concessions available upon selling your business. 

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