If they could make retirement planning an active agenda of their working lives, farmers and small business owners could benefit a great deal more from their Super investments. Sadly, unlike those who have worked as employees all their lives, these small-business owners and farmers spend their working lives thinking about how to expand their business and buy more land, jeopardising their retirement nest egg woefully by not paying enough emphasis to the concessional and non-concessional contributions.
Capital gains tax cap
For instance, imagine how beautifully these small business owners — subject to meeting certain criteria — could use their capital gains tax cap. After all, we are talking about something that can pour in nearly $2.63 million of business assets into the Super fund. The capital gains tax cap comes with an ‘eligibility’ tab, but it is well worth mulling over.
Small business CGT exemption: the “annual turnover” criterion
If you can clear the conditions required to procure small business CGT exemption, you may be in for some fun. And what are the criteria? One, your farm value (including mini affiliates of your business) must not exceed $6 million and the annual turnover must be in deficit of $2 million.
The “active asset” criterion
Moreover, the asset you are disposing off into your Super must be of active use at the time of disposal. Certain changes to the guidelines has offered breathing space to the small business owners in terms of the “active asset” rule. For instance, if a farm owned for 20 years has been farmed for 10 years then it will pass the active asset criterion even if leased out at present.
Tax-free rental income
When I talk of paying more emphasis on contributions, I don’t talk through my hat. Think of farmers who retire and lease out their farms to earn rental income on it. All the while, they keep paying taxes on this rental income. If, on the other hand, they would have opted for transferring the farm land into their Super, the rental income would become entirely tax exempt. Food for thought!
SMSF is one of the most competent DIY strategies. But like any DIY application, it may require some sound professional advice. If you need any advice in regards to your SMSF, feel free to get in touch with me.