Jessica provides consulting services through her small business. She has a number of business assets.
Let’s consider whether Jessica can apply any small business concessions.
If she has held a CGT asset for 18 years, what are the conditions she would need to meet to use the small business 15-year exemption? (Select all that apply)
- Jessica must have held the asset for at least 5 years and no more than 10 years
- Jessica must be aged 55 years or over
- Jessica must be retiring or permanently incapacitated
- Jessica must have continuously owned the active asset for 15 years
- Jessica must meet basic eligibility conditions common to all small business concessions
- Jessica must retire within 2 years of using the small business 15-year exemption
If Jessica doesn’t qualify for the small business 15-year exemption, she may be able to use the small business 50% active asset reduction to reduce the capital gain.
- True
- False
The small business 50% active asset reduction applies automatically if the basic eligibility conditions are satisfied, unless Jessica chooses to not apply it.
- False
- True
Jessica has reduced her capital gain using the CGT discount method to $35,000. Can she also use the small business active asset reduction if she’s eligible for it?
- Yes
- No
Jessica also applies the small business active asset reduction concession to the remaining $35,000 gain. What will her gain be reduced to?
- She’ll pay $26,500 in capital gains (75% of $70,000)
- Her $35,000 is reduced by a further 50% to $17,500
- She’ll pay $7,000 in capital gains (10% of $70,000)
Jessica now considers the small business retirement exemption. Under this exemption, capital gains from the disposal of active assets are exempt from CGT. What is the lifetime limit for this?
- $1,000,000
- $500,000
- $700,000
- $50,000
If Jessica has already applied the small business active asset reduction concession, can she also use the small business retirement exemption, if she’s eligible for it?
- No
- Yes
Jessica decides to also use the small business retirement exemption. She hasn’t previously claimed the small business retirement exemption in relation to a capital gain. Which of these statements is correct?
- Applying the exemption to the entire capital gain means the capital gain Jessica makes from this CGT event is disregarded. The remaining $17,500 gain is subtracted from her $750,000 small business retirement exemption lifetime limit, reducing it to $732,500
- The part of the capital gain Jessica chooses to apply the exemption to is disregarded. Having chosen to apply the exemption to the entire remaining capital gain of $17,500, this amount is subtracted from her $500,000 small business retirement exemption lifetime limit, reducing her future available limit to $482,500
