Small Business CGT concessions and disposals of intellectual property

The Small Business CGT concessions apply to some, but not all, disposals of intellectual property (“IP”) held by a company.

The concessions can apply to disposals of IP that are taxed under the CGT provisions (such as registered trade marks, unregistered marks, business name rights and domain name rights).

However, the concessions do not apply to disposals of IP that are depreciating assets (such as patents, registered designs and copyright), know-how (such as trade secrets and confidential information) or trading stock that comprises intellectual property.

So what do you do if you expect significant capital gains from the disposal of IP to which the Small Business CGT concessions can’t apply?

Well, think very seriously about whether or not you can manage a share sale instead.

A gain on the disposal of shares should generally be subject to the CGT provisions and, subject to the shares qualifying as active assets (which may involve the underlying IP needing to qualify as an active asset as distinct from being taxed under the CGT provisions), the Small Business CGT concessions could apply (subject of course to satisfying the normal eligibility requirements).