Small Business CGT Concessions

The small business CGT concessions are among the most valuable provisions in Australian tax law, allowing qualifying small business owners to reduce, defer, or eliminate CGT on the sale of active business assets (including goodwill, customer lists, equipment, and IP). Four concessions are available — and they can be stacked. The 15-year exemption: if you're aged 55+ and retiring (or permanently incapacitated), you can completely disregard a capital gain on an active asset you've owned for 15+ years. There is no monetary limit. This is the most powerful concession — a $5M gain on the sale of your business is tax-free. Even if you're not retiring, consider this in your long-term planning. The 50% active asset reduction: reduces your capital gain by 50% on active business assets. This is on top of the individual 50% CGT discount (if held 12+ months). Combined, an individual can effectively reduce a capital gain to 25% of the original amount. On a $1M gain: 50% discount = $500,000, 50% active asset reduction = $250,000 taxable. At 47% marginal rate: $117,500 tax instead of $470,000 — a saving of $352,500. The retirement exemption: allows you to exempt up to $500,000 lifetime (across all concessions claimed) by contributing to superannuation (if under 55) or simply receiving it personally (if over 55). This is often used to maximise the super contribution while keeping some proceeds personally. The rollover: defers CGT on business assets if you acquire a replacement asset or incur capital expenditure within 2 years. Useful if you're selling one business to fund another.

To access these concessions, you must meet the basic conditions: (1) you're a 'CGT small business entity' — aggregated annual turnover under $2 million, or (2) your net assets (excluding super, home, and personal-use assets) don't exceed $6 million. The asset test is often the relevant one for property-heavy businesses. The 'active asset test' must be satisfied: the asset must have been an active asset (used in the business) for at least half the ownership period or 7.5 years (whichever is less). Business intangibles — goodwill, customer contracts, trademarks, software IP — generally qualify if they're integral to the operating business. Common mistakes: (1) holding IP in a separate holding company without the active business — the IP may fail the active asset test because the holding company isn't actively carrying on a business. (2) Claiming the retirement exemption without making the required super contribution under 55. (3) Not integrating these concessions with your overall CGT position (capital losses, prior-year losses). Always involve a specialist CGT accountant before any business sale — these concessions require specific planning and documentation.