Small Business CGT Concessions
It’s not what you sell it for. It’s what you keep.
The small business CGT concessions are the most valuable tax provisions most business owners will ever use, and the ones they find out about last.
Used properly, they can reduce the tax on the sale of a business to nothing. Used badly, or found out about after the contract is signed, they’re worth a fraction of that.
The four concessions
Four reductions, applied to the same gain.
There are four, and you can apply more than one to the same gain until it reaches zero.
They are not alternatives to choose between. They are applied in sequence, each one working on what the one before it left, which is why the order matters as much as the eligibility.
- 01
The 15-year exemption
The best of the four. If you’ve continuously owned the asset for at least 15 years and you’re 55 years or older and retiring, or permanently incapacitated, the entire capital gain can be disregarded.
Not reduced. Disregarded. If you qualify for this one, you don’t need any of the others.
Whole gain disregarded
nothing left to tax - 02
The 50% active asset reduction
Halves the remaining gain. This one applies automatically once you meet the basic conditions, unless you specifically choose for it not to.
It stacks with the general 50% CGT discount. A gain that has had both applied is down to a quarter of where it started.
Halves what is left
applies automatically - 03
The retirement exemption
Lets you disregard up to a lifetime limit of $500,000 per individual. If you’re under 55 years of age when you make the choice, the amount has to go into a complying super fund or a retirement savings account. At 55 years of age or over, it doesn’t.
Despite the name, you do not have to retire. The ATO is explicit that you don’t need to end your employment, your business office holdings or your business activities to use it. A lot of owners rule themselves out of this one for no reason.
Up to $500,000
lifetime limit, per individual - 04
The small business roll-over
Defers the gain for at least two years while you acquire a replacement asset. Useful when you’re selling one business to buy another, and dangerous if the replacement never happens; the deferred gain comes back.
Gain deferred
two years, or longer
Before any of the four
What decides whether you qualify.
You have to clear the basic conditions first. This is where most people find out they’re in trouble, usually too late to fix it.
Are you an eligible entity?
You need to meet one of four. You’re a CGT small business entity with aggregated turnover under the relevant turnover threshold. Or your asset is used in a connected entity’s or affiliate’s business. Or you’re a partner in a partnership that’s a small business entity. Or you pass the maximum net asset value test.
The $6 million test
The maximum net asset value test caps the total net value of CGT assets at $6 million — including assets owned by you, your connected entities, your affiliates and entities connected with your affiliates. It’s tested immediately before the CGT event.
Is it an active asset?
The asset has to be used in the business. Goodwill and business premises usually qualify. A passive investment property held alongside the business usually doesn’t.
Shares and trust interests
If what you’re selling is shares in your company or an interest in your trust rather than the underlying assets, additional conditions apply, including the significant individual test. This is the step that most often goes wrong in practice.
Step two, up close
The $6 million test is the one that catches people.
Two things about that number matter more than the number itself.
- Market values, not book values
The test is applied to what the assets are worth, not what they are carried at. Your financial statements will not answer it.
- Never indexed for inflation
A threshold set years ago now catches businesses that nobody would describe as large, and it captures more of them every year without anything changing on paper.
- What comes out of the total
Your home is excluded to the extent you use it privately, as are personal-use assets, superannuation entitlements and life insurance policies.
An interest-earning personal bank account is not excluded, because it produces income.
The unavoidable step
You cannot know if you qualify without a valuation.
The $6 million test is a market value test. So is the value of the goodwill you’re about to sell.
Business ValuationFour levels, from an estimate of value through to a full conclusion of value that stands up under scrutiny.
Which means the question “do I qualify for the small business CGT concessions” cannot be answered from your financial statements. It requires someone to establish what your business and your connected entities are actually worth. Owners routinely discover the answer during the sale, when the structure is fixed and the contract is drafted. Three years earlier, most of what goes wrong is fixable.
Four levels
Match the rigour to the decision.
Each level adds depth. The purpose of the valuation determines the scope.
Level 1
Estimate of Business Value
A high-level indication based on your financial information and industry benchmarks. Fast and inexpensive.
Level 2
Calculated Value
A calculated valuation using agreed methodology and your actual numbers, with normalisation adjustments for owner’s remuneration and one-off items.
Level 3
Limited Scope Conclusion of Value
A focused, defensible conclusion on a defined scope. More rigorous than a calculation, narrower than a full engagement.
Used for CGT eligibility questions
Level 4
Conclusion of Value
The full engagement. Comprehensive analysis, multiple methodologies cross-checked, documented assumptions and a report written to be relied on by others.
The order matters
The concessions are applied in a set sequence.
And the sequence changes the answer.
The 50% active asset reduction is automatic. The 15-year exemption, the retirement exemption and the roll-over are choices, and each has to be made before you lodge the return for the year the CGT event happened.
Miss the lodgement, miss the choice — there is no retrospective fix
- Check the basic conditions
Nothing below is available until these are met.
- Apply the 15-year exemption
If it applies, stop here — the whole gain is disregarded and the rest of the sequence is irrelevant. An election.
- Offset any capital losses
Losses come off the gain before any concession or discount is applied.
- Apply the general CGT discount
If you’re entitled to it. Individuals and trusts are; companies are not.
- Apply the 50% active asset reduction
Automatic once the basic conditions are met, unless you specifically choose for it not to apply.
- Apply the retirement exemption or the roll-over
To whatever is left. Both are elections.
Enacted 26 June 2026 · effective 1 July 2027
What changes on 1 July 2027.
The largest change to Australia’s CGT regime since the discount was introduced in 1999.
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 leaves the small business CGT concessions in place, and lifted the aggregated turnover threshold for the 50% active asset reduction from $2 million to $10 million — bringing a substantial number of businesses into the concession for the first time. Two practical consequences follow, and neither can be left until 2027.
- The 50% discount goes
Replaced with cost base indexation for individuals and trusts.
- A 30% minimum tax arrives
Applying to capital gains made by Australian resident individuals.
- Pre-CGT assets come in
Assets acquired before 20 September 1985, including those held by companies, enter the CGT regime.
- A deemed disposal on 30 June 2027
Assets held on that date are treated as sold immediately before 1 July 2027 and reacquired at market value.
Half the gain, gone, regardless of what the asset cost you.
Worth very little on internally built goodwill, which has almost no cost base — and that describes most owner-operated businesses.
And whether or not you sell
The deemed disposal means market value evidence as at 1 July 2027 becomes important for anyone holding unlisted business assets. Valuations obtained years later, retrospectively, are harder to defend and more expensive to produce.
Six failures
Common ways this goes wrong.
Six failures account for most of the value lost, and all six are visible years in advance.
Every one of these is easy to prevent and expensive to discover.
- Sold from the wrong entity
Concessions available to one structure aren’t available to another, and by the time the contract exists it’s too late to move.
- An uncounted connected entity
The $6 million asset test is failed because of assets held by an entity nobody thought to count. The test reaches further than most owners expect.
- Premises held the wrong way
The asset fails the active asset test — usually a property sitting passively in a structure that was never reviewed.
- The election is missed
The 15-year exemption, the retirement exemption and the roll-over are choices that must be made before the return is lodged. A missed election is gone.
- The retirement exemption is written off
Because the owner assumed they had to actually retire. They don’t.
- Nobody obtained a valuation
So eligibility was answered by guesswork, and the answer turned out to be wrong.
Questions we get asked
The six that come up every time.
Do I have to retire to use the retirement exemption?
No. The ATO states directly that you don’t need to end your employment, your business office holdings or your business activities. The name is misleading and it costs people money.
Can I use more than one concession on the same sale?
Yes. You can apply as many as you’re eligible for until the gain reaches zero. The general CGT discount and the 50% active asset reduction stack, and the retirement exemption or roll-over can then be applied to what’s left.
Does my company get the 50% CGT discount?
No. Companies cannot use the general CGT discount at all. Individuals and trusts can, and complying super funds get 33.33%. This surprises a lot of owners who assumed the discount followed the business rather than the entity type.
When is the CGT event — contract or settlement?
If there’s a contract, the CGT event happens on the date of the contract, not when you settle. For a sale straddling 30 June, that distinction decides which financial year the gain lands in.
Is the $6 million assets test threshold indexed?
No. It has never been indexed for inflation, so it captures more businesses every year without anything changing on paper.
What if the business is sold after I die?
A capital gain made on the asset within two years of death can still access the retirement exemption, to the same extent the deceased could have. The requirement to pay the amount into super doesn’t apply, even if the deceased was under 55. The ATO can extend the two-year period in some circumstances.
When to have this conversation
Years before you sell. Not three months.
Structure takes time to change, and changing it in the shadow of a sale attracts attention you don’t want.
If you think you might exit in the next five years, the work starts now.
Succession & Exit PlanningFor the part of this that isn’t only tax.
Start here
Look at it while it is still
a decision.
A consultation to look at your structure, your likely eligibility and where the gaps are. No charge.
Book a consultationThis page is general information, not advice for your situation. The concessions turn on facts specific to your entity, your assets and your timing, and the rules are mid-change. Get it looked at properly.