To sell my factory? What are the options to consider for selling my factory at the time of my business sale? If you sell your business that includes a factory or an office building, do you need a strategy for options for what to do with the property? The decision is entirely depending on your personal and financial goals.
To help you with your decision-making process, here are a few possibilities:
Sell the factory along with the business:
If the new owner of your business wants to continue operating the factory or your business premises, you can consider selling it along with the rest of the business. This is the simplest option, as the new owner will take over all aspects of the business, including the factory. Make sure there is a lease in place and a market rent charged. If the new owner first strikes up a lease, it may be sold GST-free as a going concern. (check with your accountant here)
Lease the factory to the new owner:
If you want to retain ownership of the factory but no longer operate your business, you can lease the factory to the new owner. This arrangement would generate rental income for you, while the new owner would have a place to produce their goods. It’s business as usual, and the premises become passive income. You could look at transferring or selling the property to your SMSF. Obtain professional advice from a licensed SMSF accountant or a financial planner here.
Repurpose the factory:
If you do not want to sell or lease the factory, you could consider repurposing it for a different use. For example, you could convert it into commercial or residential space or rent it out to another business that needs space for production.
Sell the factory separately:
If you believe that the factory has significant value on its own, you could sell it separately from the rest of the business. Selling the factory may require more effort and time, as you must find a buyer specifically interested in purchasing a factory. The upside is that it could also result in a higher sale price for you. Your options to sell include vacant possession or with a new business owner leasing the site.
Ultimately, the best option for what to do with your factory will depend on your goals and financial situation.
Do I pay tax on the sale of my factory sale?
If you sell your factory for more than you paid for it, you may be subject to capital gains tax on the profit. Capital gains tax is a tax on the profit made from the sale of an asset, such as real estate or a factory. It is calculated as a percentage of the gain at your personal or company tax rate.
However, we can, with careful planning, reduce the pain. The exact amount of capital gains tax you will pay on the sale of your factory will depend on various factors. These include the length of time you owned the factory and the purchase and sale price. The gain may be reduced by any deductions. You may also be eligible for cgt small business tax exemptions you may be eligible for.
Will the Small business cgt concessions apply to the sale of my business factory?
Small business CGT (capital gains tax) concessions may apply to the sale of your business factory. There are several factors depending on your specific circumstances. In general, to be eligible for the small business CGT concessions, you must meet specific requirements,
Being a small business entity means having an annual turnover of less than a certain threshold. Satisfying either the maximum net asset value test or the active asset test is used to determine if you are eligible for the concessions.
There are other conditions to meet. These include such as holding the asset for a certain period of time as part of your business rather than a non-active asset.
If you meet these requirements, you may be eligible for a range of concessions on the capital gain made from selling your business factory. These may include a reduced capital gains tax rate, an exemption of up to a certain amount of the capital gain, and other benefits such as retirement concessions etc.
It’s important to note that the rules around small business CGT concessions can be complex and may vary depending on your specific situation. However, in many cases, we can assist you in reducing the tax liable on the tax.
What happens if my smsf owns my factory?
Can I lease it to another business or sell it? If your self-managed super fund (SMSF) owns your factory, you can lease it to another business. You can also sell it, but there are some restrictions and considerations you should be aware of.
Leasing the factory to another business:
If you lease the factory to another business, the rent paid by the tenant must be at market value. This will ensure you comply with the SMSF rules. Any lease agreement should comply with the relevant regulations, and documentation should be appropriately kept. It’s best to work with an SMSF specialist and/or lawyer to ensure all the legal requirements are met.
Selling the factory:
If you sell the factory, the sale proceeds will generally be subject to the same rules and restrictions as other investments in your SMSF. You will need to ensure the sale price is at market value. Resulting in any sale process contracted at conducted at arm’s length. A sale must be made to an unrelated third party at fair market value. If you sell it in pension mode, you may sell the property tax-free. Contrary to what many think, the CGT small business concessions do not apply to real business property in an SMSF.
It’s important to note that any income generated from the factory, whether from rent or sale, must be kept within your SMSF. Remember, you need to manage this in accordance with the SMSF regulations.
In addition, any changes to the assets within your SMSF, such as selling or leasing the factory, must be made in accordance with the SMSF trust deed. You also need to review the investment strategy of the fund. It’s recommended to consult with an SMSF specialist or financial adviser. This will ensure that any decisions related to the SMSF comply with the relevant regulations and guidelines.
We recommend that as you plan your business exit. We assist you with putting a strategy in relation to your office or business premises. Thinking about the strategic use and placement of these assets early gives you options and the ability to plan your future.