The owner's guide
Small business CGT concessions: sell, and keep it.
Four concessions in the tax law exist specifically so the sale of a small business isn't taxed like a windfall. Used properly - and in the right order - they take many eligible owners to little or no capital gains tax on the sale. Here's how they work, who qualifies, and the worked example most firms won't publish.
How the tax is worked out
The order of operations - because the order is the strategy.
CGT on a business sale isn't one calculation, it's a sequence - and each step only sees what the previous one left behind. That's why two owners with identical sale prices can keep wildly different amounts.
- 01
The capital gain
Sale proceeds minus what the asset cost you. Triggered at contract date, not settlement.
- 02
Capital losses
Any current or carried-forward losses come off first - before the discounts, which is exactly where you don't want them.
- 03
The general 50% discount
Individuals and trusts holding over 12 months halve the gain. Companies don't get this one.
- 04
The small business concessions
The four concessions below, applied in order - if you pass the eligibility gateways.
- 05
What's left is taxed
Added to assessable income in the contract year. Often, for eligible owners, this line reads zero.
The gateways
Who qualifies: the $2 million and $6 million tests.
Gateway 1 - turnover
You're a CGT small business entity: carrying on a business with aggregated turnover under $2 million. "Aggregated" is doing real work in that sentence - it pulls in affiliates and connected entities.
Gateway 2 - net assets
Or you pass the $6 million maximum net asset value test: the net value of your CGT assets - yours, your affiliates' and connected entities', excluding your home and super - just before the sale. Fail one gateway, and the other can still get you in.
Always: the active asset test
The asset sold must have been active - used in a business by you or an entity connected with you - for at least half the time you owned it (or 7.5 years if owned longer than 15). Goodwill counts. Assets mainly earning rent generally don't.
Selling shares in a company or units in a trust rather than the business assets? The concessions can still apply, but two more tests arrive: a significant individual (20%+ participation) and 80%+ of the entity's assets being active. This is the terrain where do-it-yourself eligibility calls most often go wrong.
The four concessions
Four tools, applied in order.
1 · The 15-year exemption
The full wipeOwned the asset continuously for 15 years, you're 55 or over, and the sale happens in connection with your retirement (or you're permanently incapacitated)? The entire capital gain is exempt. No 50% discount needed, no caps consumed, nothing else in the sequence applies. Proceeds can go into super under the lifetime CGT cap - a separate, indexed cap that has sat just under $2 million in recent years - without touching your ordinary contribution limits. This is the single most valuable sentence in Australian small business tax, and it rewards owners who planned their structure 15 years ago. If that's not you, keep reading - the next three stack.
2 · The 50% active asset reduction
The second halvingWhatever gain survives the general discount is halved again. For an individual, that's 75% of the gain gone before the next step. It applies automatically - though it's optional, and companies sometimes choose to skip it, because an exempt amount sitting inside a company still has to be paid out to a human eventually, and the payout can create a second tax point the concession never touched.
3 · The retirement exemption
$500,000 - no retirement requiredUp to $500,000 of the remaining gain, per person, over a lifetime, exempt. Despite the name, you don't have to retire. The one condition that bites: under 55, the money must go into super; 55 and over, it's yours in hand. For a couple who both qualify as stakeholders, that's up to $1 million of gain extinguished - which is why who owns the business, on paper, years before the sale, is a six-figure question.
4 · The small business rollover
The deferralAnything still standing can be deferred by acquiring a replacement active asset within two years - buying the next business, or capital improvements to one you already run. Miss the window and the gain crystallises; reach it and the tax waits for the next sale, where the whole sequence runs again. Owners stepping from one venture to the next use this as the bridge.
The worked example
From an $800,000 gain to zero tax - legitimately.
A 58-year-old sole owner sells her business for an $800,000 capital gain. She's run it 11 years (so no 15-year exemption), turnover is under $2 million, the assets are active, and she hasn't used any retirement exemption before.
| Capital gain on sale | $800,000 |
| General 50% discount (held over 12 months) | − $400,000 |
| 50% active asset reduction | − $200,000 |
| Retirement exemption (within her $500k lifetime cap) | − $200,000 |
| Taxable capital gain | $0 |
She banks the full sale price, keeps $300,000 of her lifetime retirement exemption cap for a future sale, and being over 55, none of it is forced into super. Honest limit: this is the clean case. A company structure, a share sale, connected entities near the $6 million line or an earnout each change the sequence - which is why the modelling happens before the contract, not at tax time.
Where it goes wrong
The five traps that cost real money.
The contract date trap
The gain is triggered when you sign, not when you settle. A June signature versus a July one moves the gain a whole financial year - and with it, the planning window.
The company discount trap
Companies don't get the general 50% discount, and concession-exempt amounts still have to exit the company to reach you. Selling company-held assets without modelling the exit of the cash is how paper savings evaporate.
The $6 million measurement trap
Net assets are measured just before the sale and include connected entities. A business that grew well - or a family trust nobody mentioned - can push you over the line in the final year.
The last-minute restructure trap
Moving assets or ownership just before a sale can fail the active asset clock, reset holding periods, or trigger its own tax. The structures that reach the concessions were set years out.
The share sale trap
Selling shares instead of assets brings the significant individual and 90% stakeholder tests. Deals have failed eligibility over percentage points that a shareholding tweak, made early enough, would have fixed.
The free path
The ATO publishes its own guidance on the concessions, free, and it's the authority on the law. What it can't do is tell you which sequence, structure and timing suits your sale - that's the modelling, and it's where the money is.
Good questions
The concessions, answered straight.
Am I still eligible if my turnover is over $2 million?＋
Possibly - the two gateways are alternatives. You qualify if aggregated turnover is under $2 million or if the net value of your CGT assets (including connected entities, excluding your home and super) is under $6 million just before the sale. Plenty of businesses fail one test and pass the other.
Do I have to retire to use the concessions?＋
Mostly no. Only the 15-year exemption requires the sale to be in connection with your retirement (and that you're 55 or over, or permanently incapacitated). The retirement exemption, despite the name, doesn't require you to retire at all - you can claim it and keep working.
Can I use more than one concession on the same sale?＋
Yes, and the order matters. After capital losses and the general 50% discount, the 15-year exemption (if you qualify) wipes the whole gain and nothing else is needed. Otherwise you can stack the 50% active asset reduction, then the retirement exemption, then roll over whatever is left.
Does my company get the general 50% CGT discount?＋
No - companies aren't entitled to the general 50% discount. That changes the arithmetic of a company-held sale substantially, and it's one of the reasons the structure you sell from needs to be decided years before the contract, not weeks.
How much of the sale can I put into super?＋
Two doors. Retirement exemption amounts (up to the $500,000 lifetime limit) must go into super if you're under 55, and may if you're older. Proceeds covered by the 15-year exemption can be contributed under the lifetime CGT cap - a separate cap, indexed annually, that has sat just under $2 million in recent years - without using your ordinary contribution caps.
What counts as an active asset?＋
An asset used (or held ready for use) in carrying on a business - by you, your affiliate or a connected entity. It must have been active for at least half the time you owned it, or 7.5 years if you've owned it longer than 15. Goodwill counts. Assets whose main use is deriving rent generally don't.
Do the concessions apply if I sell the shares in my company instead of the business assets?＋
They can, but the tests get stricter: the company needs a significant individual (someone with a 20%+ participation percentage), CGT concession stakeholders must hold at least 90% of the entity claiming the concession, and an 80%+ share of the company's assets must be active. Share sales are exactly where DIY eligibility calls go wrong.
When is the capital gain actually triggered?＋
At the contract date, not settlement. Sign in June and settle in August and the gain belongs to the earlier financial year - which changes when tax is payable and which year's planning applies. A few weeks' difference on a signature can move the outcome materially.
Model your sale before you sign anything.
Chris Tinta's chartered team models your eligibility, sequence and structure against the actual legislation - and James works the value side of the same deal. Confidential, director-level, no obligation.