CGT 15-Year Exemption: A Complete Guide for Australian Small Business Owners (FY 2025-26)

Published 26 May 2026 · 7 min read

If you've been running a small business in Australia for over 15 years and are nearing retirement, the CGT 15-year exemption could save you hundreds of thousands of dollars in capital gains tax. This small business concession, contained in Subdivision 152-B of the Income Tax Assessment Act 1997, allows you to disregard a capital gain on an active business asset you've continuously owned for at least 15 years — provided you're aged 55 or over and retiring, or are permanently incapacitated. There's no dollar limit on how much gain you can disregard, making it potentially the most valuable of all the small business CGT concessions.

What Is the CGT 15-Year Exemption?

The 15-year exemption is one of four small business CGT concessions available under Australian tax law. It's the most generous because it allows you to disregard 100% of the capital gain on an active business asset with no dollar cap. Unlike the 50% active asset reduction or the retirement exemption (which has a $500,000 lifetime limit), the 15-year exemption has no maximum — if you sell your business for $5 million after 15 years, the entire gain can be tax-free.

The policy rationale is straightforward: small business owners who have dedicated 15+ years to building a business deserve to retire without a crippling tax bill when they sell. The exemption ensures that the sale proceeds go toward your retirement rather than the ATO, recognising the years of hard work, risk, and lower income that often characterise small business ownership.

This exemption applies to CGT events happening on or after the qualifying date, with the most common being A1 (disposal of an asset) — typically the sale of your business premises, goodwill, or shares in a company that owns active assets. Understanding the eligibility conditions is critical because getting it wrong can mean a surprise tax bill of hundreds of thousands of dollars.

Who Qualifies for the 15-Year Exemption?

The eligibility criteria are strict and must all be satisfied at the time of the CGT event. Here are the five essential conditions:

Each condition carries specific nuances that can trip up unwary business owners. Let's examine each one in detail.

Small Business Entity Test

To qualify as a small business entity, you must satisfy either the $10 million aggregated turnover test (your total annual turnover, including that of connected entities and affiliates) or the $6 million net asset value test (the total net assets of you, your connected entities, and affiliates not exceeding $6 million just before the CGT event). The net asset test includes all assets — business and personal — minus associated liabilities. If you own a $4 million family home with a $500,000 mortgage, that counts as $3.5 million toward the $6 million limit, leaving you with only $2.5 million of headroom for business assets.

Active Asset Requirement

An asset is considered "active" if it was used in the course of carrying on your business for at least half of the ownership period (or, if owned for less than 15 years, for at least 7.5 years out of the total period). This includes business premises, plant and equipment, goodwill, and intellectual property used in the business. It does not include assets held purely for investment purposes, such as a rental property held by your business but not used in its primary operations. If the asset was used partly for business and partly for private purposes, only the business-use portion may qualify.

The 15-Year Continuous Ownership Rule

The 15-year continuous ownership period is measured from the date you acquired the asset to the date of the CGT event. Key points to understand:

• The 15 years must be continuous — any break in ownership resets the clock
• If you acquired the asset before 20 September 1985 (pre-CGT), the exemption doesn't apply because CGT doesn't apply to those assets at all
• If you inherited a business asset, the deceased's ownership period can be added to yours in certain circumstances
• If the business was restructured or the asset transferred between related entities, the continuity period may be preserved under rollover provisions

The ATO takes a strict approach to the "continuously owned" requirement. If you transferred the asset to a different legal entity (even within your own business structure) and the transfer triggered a CGT event that wasn't eligible for rollover relief, the 15-year clock restarts. Proper structuring early in your business journey is essential to ensure you can access this concession later.

Age and Retirement Conditions

This is where the 15-year exemption differs most sharply from other small business concessions. You must be either:

• Age 55 or over at the time of the CGT event, and the event happens in connection with your retirement — meaning you permanently cease carrying on the business
• Permanently incapacitated (at any age) — meaning you suffer from a condition that is likely to be permanent and prevents you from continuing to work in your business

The "in connection with retirement" test is important. You don't need to retire on the exact same day as the sale, but the CGT event must genuinely be connected to your retirement from that business. If you sell the business and start a new one the following week, the ATO may argue the sale wasn't connected to retirement and deny the exemption.

For those under 55 who aren't incapacitated, the retirement exemption (a different small business concession) may be available instead. That concession allows you to disregard up to $500,000 of capital gains in your lifetime, provided you put the proceeds into a retirement savings account or superannuation. While less generous than the 15-year exemption, it still provides significant tax relief.

How the Exemption Interacts With Other Concessions

The small business CGT concessions can generally be applied in a specific order to maximise tax savings. ATO's preferred ordering is:

In practice, the 15-year exemption is generally applied before the 50% CGT discount and the 50% active asset reduction, because it disregards the entire gain anyway — there's no need to stack reductions. However, if you don't meet the age or retirement condition, you can still potentially apply the other concessions in the order shown above to significantly reduce your tax liability.

A common strategy for business owners approaching 55 is to carefully time the business sale to fall after their 55th birthday, unlocking the 15-year exemption and saving potentially hundreds of thousands of dollars. If you're planning your exit, consult with a tax advisor well in advance to ensure your structure and timing align. Use our income tax calculator to see what your tax bill would look like with and without the concession.

The $500,000 Retirement Exemption Alternative

If you don't qualify for the 15-year exemption (perhaps you're under 55, or you're over 55 but not retiring), the retirement exemption under Subdivision 152-D offers an alternative. This allows you to disregard up to $500,000 of capital gains in your lifetime, but with an important condition:

• If you're under 55, the exempted amount must be paid into a superannuation fund or retirement savings account
• If you're 55 or over, you don't need to contribute to super but the gain is still limited to $500,000 total across your lifetime
• The $500,000 cap applies per individual, not per business or asset

Compare this to the 15-year exemption, which has no dollar cap — a business worth $2 million, $5 million, or even more can be sold entirely tax-free under the right circumstances. The choice between concessions depends heavily on your age, retirement plans, and the value of your business.

If you qualify for both, the 15-year exemption is almost always preferable due to the lack of a cap. However, the retirement exemption can be useful as a fallback if you meet the small business and asset tests but fail the age/retirement or 15-year ownership tests. Use our take-home pay calculator to see how the sale proceeds translate into usable retirement income after tax.

Superannuation and the 15-Year Exemption

The interaction between the 15-year exemption and superannuation is particularly favourable for retiring business owners. Since the sale proceeds are tax-free, you can contribute a significant portion (up to the non-concessional cap or even more under the CGT cap) to super without incurring additional tax:

• CGT cap amount: If you qualify for the 15-year exemption, you can contribute up to $1.695 million (FY 2025-26) of the proceeds to super as a personal contribution, outside the normal non-concessional cap ($120,000 per year or up to $360,000 under the bring-forward rule)
• The CGT cap is indexed and updated annually by the ATO
• This contribution must be made within 30 days of receiving the proceeds, or within a reasonable time if there's a delay
• You must notify your super fund that you're claiming the CGT cap treatment

This is a powerful combination: sell your business tax-free under the 15-year exemption, then contribute up to $1.695 million into super to grow in a tax-advantaged environment for retirement. The super fund pays just 15% tax on earnings during the accumulation phase, and 0% on earnings once you start an account-based pension after turning 60.

For business owners with a self-managed super fund (SMSF), the proceeds can be even more strategically deployed — for instance, purchasing business premises from the entity and leasing it back to generate retirement income. Use our superannuation calculator to project how the sale proceeds can support your retirement. And to understand how super contributions affect your overall tax position, try our salary sacrifice calculator.

Common Pitfalls and How to Avoid Them

The 15-year exemption is a significant tax benefit, but the ATO applies strict scrutiny. Here are the most common mistakes:

1. Timing Issues

If you sell your business at age 54 and 11 months, you miss the age requirement entirely — regardless of how close you are to 55. The ATO does not prorate the age test. Similarly, if you retire from the business but the sale contracts settle after a significant delay, the ATO may question whether the retirement was genuinely connected to the sale. Ensure both the age and retirement conditions are clearly satisfied on the date of the CGT event.

2. Asset Characterisation

The asset must be an "active asset" for at least half the ownership period. If your business premises were rented out to a third party for 10 of the 15 years and only used in your business for 5 years, the asset fails the active asset test. Maintain clear records of how your assets were used throughout the ownership period to substantiate your claim if the ATO audits.

3. Net Asset Value Blowout

The $6 million net asset test includes all your assets — business and personal. If you've accumulated significant personal assets over the 15+ years (a large family home, investment properties, shares), you may exceed the threshold without realising it. The test looks at the net asset value just before the CGT event, so it's worth doing a detailed calculation well in advance of any planned sale.

4. Entity Restructuring Errors

Transferring business assets between entities (e.g., from a sole trader structure to a company, or between companies) can break the 15-year continuous ownership period if rollover relief is not available. Always seek professional advice before restructuring a business that has been operating for many years to ensure the 15-year clock isn't reset.

Planning Your Exit Strategy

If you're a small business owner approaching 55 with 15+ years of ownership, the 15-year exemption should be a central part of your retirement planning. A well-timed exit could mean the difference between paying hundreds of thousands in tax and keeping every dollar of your business sale proceeds.

Here's a practical checklist for business owners considering this concession:

• Verify your ownership period: Confirm the exact date you acquired the asset and calculate whether you've held it for 15 continuous years
• Calculate your net asset position: Total all your assets (business and personal) and subtract liabilities to confirm you're under $6 million
• Review your age: If you're under 55, consider whether you can delay the sale until after your birthday
• Plan your retirement: Ensure the sale genuinely connects to your retirement from the business — don't start a similar business immediately after
• Consult a tax advisor: The rules are complex, and professional advice is essential to structure the transaction correctly
• Prepare super arrangements: If you plan to use the CGT cap to contribute proceeds to super, have your super fund ready and understand the timeline

The 15-year exemption is one of Australia's most valuable small business tax concessions, specifically designed to reward long-term business builders with a tax-free retirement transition. Combined with careful superannuation planning, it can form the cornerstone of a financially secure retirement after decades of business ownership. Use our take-home pay calculator and income tax calculator to model different sale and retirement scenarios.

Frequently Asked Questions

Can I use the 15-year exemption if I'm under 55?

Only if you're permanently incapacitated. Otherwise, you must be 55 or over and retiring from the business. If you're under 55 and don't qualify for the incapacity exemption, consider the retirement concession (up to $500,000 lifetime) or the 50% active asset reduction instead.

Does the 15-year exemption apply to goodwill?

Yes, goodwill is an active asset if it's inherently connected to the business. When you sell your business as a going concern, the goodwill value is typically considered an active asset and can qualify for the 15-year exemption, provided it was owned for at least 15 continuous years and all other conditions are met.

What happens if I sell part of my business before the 15-year mark?

Selling any portion of the asset before the 15-year point may reset the ownership clock for the remaining portion, depending on how the sale is structured. Partial asset disposals can be complex — the ATO looks at whether you retained beneficial ownership of the remaining asset. Professional advice is strongly recommended before any partial sale.

Is there a dollar limit on the 15-year exemption?

No — this is what makes the 15-year exemption unique among the small business CGT concessions. The retirement exemption is capped at $500,000 lifetime, and the active asset reduction halves the remaining gain, but the 15-year exemption disregards the entire gain regardless of size, as long as all conditions are satisfied.

Can I use the 15-year exemption for a rental property I own through my business?

Generally no, unless the property is actively used in the business (e.g., a factory, warehouse, shop, or office). A rental property held purely for investment income is a passive asset and does not qualify as an active asset for CGT purposes. If the property was used partly for business and partly for private or investment purposes, only the business-use proportion may qualify.

How do I claim the 15-year exemption on my tax return?

You claim it in your income tax return for the year the CGT event happened. You'll need to complete the CGT schedule and small business concessions section of your tax return, providing details of the asset, the ownership period, and how you meet each condition. Given the complexity and the amounts involved, engaging a registered tax agent with CGT expertise is essential.