In May 2024, a couple of entrepreneurial clients (let’s call them Jen and Jerry) approached us to help develop a strategy to best utilise the proceeds from the recent sale of their business. Their business journey had been an incredible ride, but they were facing a significant hurdle—a looming tax bill exceeding $300,000 as a result of selling their business.
Background
The business, which had been operating through a company since its inception in 2018, had undergone several restructures. This made it hard to assess small business concession eligibility. Ultimately, Jen and Jerry’s accountant advised them that the size of their business disqualified them from claiming any small business concessions.
Our approach
Curious, and determined to add value, we requested permission to review the sale documents. Our intention was that if we uncovered any opportunities, we would bring in a trusted specialist tax adviser to assess eligibility for the small business tax concessions.
The key steps we took were:
1. Deep dive into documentation
We meticulously examined the company’s records, uncovering complexities in its structure and share ownership over time.
2. Engaged expertise
After identifying a potential case for concessions, we collaborated with a specialist tax accountant we had worked with before to reconstruct the business share history and KPIs. (Both of which needed to be considered when reviewing for small business concessions.)
A race against time
What typically takes months had to be accomplished in just a few weeks as the end of the financial year loomed. Despite the time crunch, our team and the tax specialist accountant worked tirelessly to compile and present a watertight case for small business concessions.
The result
Just days before the financial year ended, we had fantastic news: the clients qualified for small business concessions.
This is how that looked:
- Gross capital gain: $1,352,000
- Less 50% discount: $676,000
- Less 50% Active Asset Reduction: $338,000
- Less: Small business Rollover: $338,000
- Taxable Capital Gain: $0
The final concession applied was rollover relief, allowing the clients to reinvest their sale proceeds into their next entrepreneurial venture. Today, they’re continuing their journey as business owners, along with their hard-earned capital and a team of trusted advisers.
Key takeaways
- Always get a second opinion: Especially when it comes to complex tax areas. You never know what valuable opportunities can be uncovered.
- Pay attention to detail: Diligent record-keeping and analysis can unlock significant benefits.
- Specialist support is key: Working with trusted experts can lead to better outcomes.
- Rollover relief advantage: This concession can be a powerful tool for reinvesting in new business ventures.
- Time is critical: Acting quickly and efficiently can make a big difference in complex financial matters.
At HPH Solutions, we thrive on helping clients navigate complex situations to achieve their financial goals. If you or someone you know is facing a similar challenge, let’s talk!