Small Business Capital Gains Tax Concessions: What You Need to Know

If you are considering selling your small business in Australia, understanding small business capital gains tax concessions (CGT concessions) can save you thousands when selling business assets. The Australian Taxation Office (ATO) offers several concessions designed to reduce or even eliminate the capital gains tax payable on active business assets.

Down below we will explain the key small business CGT concessions, eligibility criteria, how to apply, and practical tips to maximise your tax savings. Whether you’re selling your business, a commercial property, or other assets, knowing your entitlements can significantly improve your financial outcome.

What Are Small Business Capital Gains Tax Concessions?

Capital Gains Tax applies when you sell an asset for more than its purchase price or cost base. Here’s a guide to understanding the basics of Capital Gains Tax if you need a refresher. CGT can have a big impact on the proceeds from selling business assets such as property, goodwill, or equipment.

For most small business owners, your business is your retirement fund. Small business CGT concessions support small business retirement planning, business succession, and growth.

There are four primary concessions available:

1. 15-Year Exemption
2. 50% Active Asset Reduction
3. Retirement Exemption
4. Rollover Relief

Each concession has specific eligibility criteria and benefits, and in many cases, you can combine concessions to reduce your CGT liability further.

Eligibility For Small Business CGT Concessions & Exemptions

To access these concessions, your business must meet certain tests:

• Aggregated turnover test: Your business and any connected or affiliated entities must have an aggregated turnover of less than $2 million.
• Net asset value test: Alternatively, your net assets (including those of connected entities) must not exceed $6 million.
• Active asset test: The asset must be an active asset used in your business operations. This includes tangible assets like machinery and intangible assets like goodwill.
• Ownership test: You must have owned the asset for certain time periods to access different concessions (e.g. 15-Years).

The active asset test is critical. It requires that the asset be used or held ready for use in the course of carrying on a business. For example, business premises, equipment, or a business’s goodwill typically qualify, but passive investments like shares or rental properties usually do not.

The rules to figure out whether other entities are connected or affiliated with you are complex. 

If your business structure involves a trading company, trusts or partnerships, additional rules apply to determine eligibility, so professional advice is recommended.

The Four Small Business Capital Gains Tax Concessions Explained

Before diving into each concession, it’s important to understand that these small business CGT concessions are designed to reduce, defer, or even eliminate capital gains tax on active assets used in your business. To qualify, you must first meet basic eligibility conditions such as those outlined above. 

The concessions can be applied individually or in combinationto maximise your tax benefits. Understanding how these concessions interact could save thousands in CGT liability when you sell your business.

1. Small Business 15-Year Exemption

This concession allows you to disregard the entire capital gain on an active asset if:

• You have owned the asset for at least 15 years, and
• You are aged 55 or older and are retiring, or are permanently incapacitated, and
• The asset is an active asset used in your business.

For example: If you’re selling your business premises after 20 years to retire, you could qualify for the 15-Year Exemption and pay no CGT on the sale.

This exemption can provide substantial tax relief, especially for business owners approaching retirement. Retirement does not need to be permanent , but there would need to be a significant reduction in the hours worked. 

2. Small Business 50% Active Asset Reduction

If you don’t qualify for the 15-year exemption, you may still be eligible to reduce your capital gain by 50% on an active asset. This reduction is in addition to the general 50% CGT discount available to individuals and trusts who have held assets for at least 12 months.

For example: If you sell business equipment for a $100,000 gain, the general 50% discount reduces this to $50,000, and the 50% active asset reduction further reduces it to $25,000.

3. Small Business Retirement Exemption

This concession allows you to exempt up to $500,000 of capital gains from tax over your lifetime when you sell an active business asset. If you’re under 55, the exempt capital gain must be contributed into a complying superannuation fund. Be mindful that this is subject to the lifetime CGT cap for super contributions, which is $1.705 million for the 2025/26 financial year. This cap is separate from the standard non-concessional and concessional contributions caps. You’ll also need to stay within the super contributions cap rules which are separate from your usual concessional caps.

For example: If you sell your business goodwill for a $400,000 gain while under 55, you can direct this to your super fund, using the Retirement Exemption to reduce your CGT liability.

The retirement exemption can be used flexibly and combined with other concessions.

4. Small Business Rollover Relief

Rollover relief lets you defer all or part of a capital gain when you sell an active asset if you acquire a replacement asset or make capital improvements within a specified timeframe (generally two years).

For example: If you sell machinery and buy new equipment within 18 months, you can defer the capital gain until you sell the new equipment.

This concession helps businesses reinvest without immediate tax consequences.

How To Apply For Small Business Capital Gains Tax Concessions

Claiming these concessions requires careful preparation before you sell your business:

• Calculate the capital gain or loss on the asset sale.
• Apply the general 50% CGT discount if eligible.
• Apply the small business CGT concessions in the order prescribed by the ATO.
• Complete the relevant sections of your tax return.
• Maintain thorough records, including purchase and sale documents, evidence of asset use, and business turnover details.
• Our tax checklist can help you stay organised when preparing to claim CGT concessions.

It’s essential to keep accurate records to substantiate your claims and avoid issues with the ATO.

Practical Tips To Maximise Your CGT Savings

• Hold assets for at least 12 months to qualify for the general CGT discount.
• Plan asset sales around your retirement to take advantage of the 15-year exemption or retirement exemption.
• Consider business structure — trusts and companies have different CGT implications.
• Use rollover relief strategically to defer tax while reinvesting.
• Keep detailed records of asset use and business activities.
• Seek professional advice early to utilise small business capital gains tax concessions effectively.

How Solve Accounting Can Help You With Small Business CGT

Small business capital gains tax concessions can be complex. At Solve Accounting, we offer tax services to help you apply the right concessions and reduce your CGT liability legally.
If you’re planning to sell a business asset or want to understand your options, book a call with our team today to get started.

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