Who Qualifies for CGT Small Business Concessions?

To access any of the four CGT small business concessions, you must meet the basic conditions set by the Australian Tax Office. The first and most important condition is that your business has an aggregated turnover of less than $10 million per year, or your net asset value (including related entities) is under $6 million.

The asset you are selling must be an active asset. An active asset is one used in the course of carrying on your business. Examples include business premises, equipment, goodwill, and intellectual property used in your business. Shares in a company or units in a trust can also be active assets if you have at least 20% ownership and the entity runs a business.

You must also be a CGT small business entity. This generally means you carry on a business with an aggregated turnover under $10 million. If you are a sole trader, partnership, trust, or company, you may qualify.

The Four CGT Small Business Concessions Explained

Australia offers four distinct small business CGT concessions. You can apply them in a specific order to maximise your tax savings. The concessions are designed to be stacked, meaning you can use more than one on the same capital gain.

The standard order of application is: 50% active asset reduction first, then the retirement exemption or rollover, and finally the 15-year exemption (which is a standalone option).

The 15-Year Exemption

The 15-year exemption is the most generous concession. It provides a complete exemption from capital gains tax on the sale of a business asset. To qualify, you must have owned the asset for at least 15 years, and you must be either aged 55 or over and retiring, or permanently incapacitated.

If you meet these conditions, the entire capital gain is disregarded. You do not need to report the gain in your tax return. This is an all-or-nothing concession — you cannot use it partially.

The 50% Active Asset Reduction

The 50% active asset reduction cuts your remaining capital gain in half after applying the 50% CGT discount (if you are eligible). If you have held the asset for more than 12 months, the 50% CGT discount applies first, then the 50% active asset reduction applies to the remaining gain.

For example, if you make a $200,000 capital gain on a business asset held for more than 12 months, the 50% CGT discount reduces it to $100,000. The 50% active asset reduction then reduces it further to $50,000. The result is that only $50,000 is included in your assessable income.

The Retirement Exemption

The retirement exemption allows you to disregard up to $500,000 of capital gains (lifetime limit) if the gain is paid into a complying superannuation fund. If you are under 55, the amount must go into super. If you are 55 or over, you can receive the money directly.

The $500,000 cap is a lifetime limit across all small business retirement exemptions you claim. You cannot claim more than $500,000 total, even if you sell multiple businesses over your lifetime.

The Rollover

The rollover concession allows you to defer paying CGT if you use the proceeds from selling a business asset to buy a replacement asset. The gain is rolled over and reduces the cost base of the new asset. You pay the tax later when you eventually sell the replacement asset.

The replacement asset must be acquired within two years of the CGT event. It must also be an active asset used in your business. The rollover is flexible — you can use it partially, applying it to only part of the gain.

How to Apply the Concessions in Order

The ATO provides a specific order for applying the concessions. Understanding this order helps you maximise your tax savings when selling your business.

Step 1: Calculate your capital gain using normal CGT rules. Apply the 50% CGT discount if you held the asset for more than 12 months (for individuals and trusts).

Step 2: Apply the 50% active asset reduction to the remaining gain. This halves whatever is left after the CGT discount.

Step 3: Apply the retirement exemption to reduce the gain further. Any amount you use for retirement must go into super if you are under 55.

Step 4: Apply the rollover for any remaining gain. This defers the gain to a replacement asset.

Use our income tax calculator to see how your business income is taxed. Check our superannuation guide to understand how the retirement exemption works with your super contributions.

Common Mistakes and Pitfalls

Small business CGT concessions are generous, but the rules are complex. Many business owners make mistakes that cost them thousands in tax.

Missing the $6 million net asset test. The test counts assets of connected entities and affiliates. You must include business assets owned by your spouse, children's trusts, or related companies. The family home is excluded, but other personal-use assets are not.

Selling goodwill without meeting the active asset test. Goodwill is an active asset only if it relates to your business. If you stop trading before selling, the goodwill may no longer be an active asset. You need to complete the sale while the business is still operational.

Not keeping proper records. The ATO expects detailed records showing when you acquired the asset, how you used it in your business, and how long it was an active asset. Without proper records, you may lose access to the concessions.

CGT Concessions vs Business Structure

Your business structure affects how CGT small business concessions apply. Different structures have different rules and limits.

Sole traders can access all four concessions directly. The 50% CGT discount and the 50% active asset reduction combine to potentially leave only 25% of the original gain as taxable.

Companies cannot access the 50% CGT discount (which is only available to individuals and trusts). However, companies can use the 50% active asset reduction, the retirement exemption, and the 15-year exemption.

Trusts can access all concessions. The trustee can distribute the discounted gain to beneficiaries, who then apply their own tax rates. This makes trusts a flexible structure for business owners planning an exit.

Use our take-home pay calculator to understand how a business sale might affect your personal income. Visit our salary sacrifice guide for strategies to optimise your super contributions.

Frequently Asked Questions

Can I use more than one CGT small business concession at once?

Yes, you can stack multiple concessions on the same capital gain. The standard order is: 50% CGT discount (if eligible), then 50% active asset reduction, then retirement exemption, then rollover. The 15-year exemption is a standalone concession that replaces all others. Careful planning can reduce your taxable gain to zero.

What happens if I don't meet the $6 million net asset test?

If your net assets exceed $6 million, you may still qualify using the $10 million aggregated turnover test. If you pass that test and your asset is an active asset, you can still access all four concessions. Many larger small businesses use the turnover test instead of the asset test.

Is goodwill an active asset for CGT purposes?

Yes, goodwill is considered an active asset if it is inherently connected to your business. However, personal goodwill (where the business relies on your personal skills or reputation) can be harder to prove as an active asset. The ATO scrutinises goodwill valuations carefully, so get a professional valuation before selling.

How does the retirement exemption work with super?

If you are under 55, the amount you claim under the retirement exemption must be paid into a complying superannuation fund. It counts towards your non-concessional contributions cap. If you are 55 or over, you can receive the payment directly. The lifetime cap is $500,000 across all your claims.

Do I need a professional to apply CGT small business concessions?

Highly recommended. The CGT small business concessions involve complex interaction rules, particularly around connected entities and the ordering of concessions. A qualified tax accountant or tax lawyer can help you structure the sale to maximise your concessions and avoid costly mistakes.