Small business owners in Australia can access four powerful CGT concessions that can reduce or eliminate capital gains when selling business assets. These concessions are among the most generous in the tax system — but they come with strict eligibility requirements.
The Four Small Business CGT Concessions
| Concession | Effect |
|---|---|
| 15-Year Exemption | Full CGT exemption — no capital gain assessable |
| 50% Active Asset Reduction | Reduces the capital gain by 50% |
| Retirement Exemption | Excludes up to $500,000 lifetime from CGT |
| Rollover | Defers CGT to a replacement asset |
You may be able to apply more than one concession to the same transaction, stacking them to further reduce the gain.
Basic Eligibility Requirements
Before accessing any of the concessions, you must meet one of two basic eligibility tests:
Test 1 — Aggregated turnover: Your aggregated annual turnover (your business plus associated entities) is less than $2 million.
Test 2 — Net asset value: Your net assets (excluding your main residence, super, and certain personal assets) are less than $6 million.
Additionally, the asset sold must be an active business asset — broadly, an asset used in a business you carry on (not a passive investment).
The 15-Year Exemption
The most generous concession — a full exemption from CGT with no limit.
Requirements:
- You have owned the asset for at least 15 years continuously
- You are at least 55 years old at the time of disposal, OR you are permanently incapacitated
- The asset was an active asset throughout most of the ownership period
- You must satisfy the basic eligibility tests
If you sell a business you have owned for 15+ years and meet the conditions, you pay no CGT on the sale — regardless of the size of the gain.
Amounts received under the 15-year exemption can be contributed to superannuation under the CGT cap (currently $1.705 million for FY2025–26) without counting towards the non-concessional contributions cap.
The 50% Active Asset Reduction
If you don’t qualify for the 15-year exemption, you may reduce the capital gain by 50% using the active asset reduction. This is available to all eligible small businesses and stacks with the general 50% CGT discount.
Example — stacking both discounts:
- Capital gain: $500,000
- Less general 50% CGT discount (if held >12 months): −$250,000
- Remaining gain: $250,000
- Less 50% active asset reduction: −$125,000
- Taxable capital gain: $125,000
The result: the original $500,000 gain is reduced to $125,000 taxable — 25% of the original gain.
The Retirement Exemption
A lifetime exclusion of up to $500,000 in capital gains from the sale of active business assets.
- If you are under 55, the excluded amount must be contributed to a superannuation fund (within certain time limits)
- If you are 55 or over, the amount does not need to go into super — you can keep it
The $500,000 is a lifetime cap across all uses of the retirement exemption.
The Rollover
Instead of triggering CGT now, you can roll over the gain to a replacement asset acquired within two years of the sale (one year before or two years after).
- The gain is not eliminated — it is deferred until you sell the replacement asset
- Useful when you are reinvesting proceeds into a new business asset and want to defer the tax liability
Applying the Concessions in Order
The ATO has a specific order for applying small business CGT concessions:
- General 50% CGT discount (if eligible)
- 50% active asset reduction
- Retirement exemption (up to $500,000 remaining gain)
- Rollover (for any remaining gain)
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Frequently Asked Questions
Who qualifies for small business CGT concessions? Broadly, small businesses with aggregated turnover under $2 million or net assets under $6 million that are selling active business assets. The individual concessions have additional specific requirements.
Can I use the small business CGT concessions on an investment property? Generally no. The concessions apply to active business assets — assets used in carrying on a business. A passive investment property is not an active business asset.
Do the small business CGT concessions apply to shares in a company? They can, but only if the shares qualify as active business assets under the ATO’s tests (broadly, if 80% or more of the company’s assets are active business assets). Complex rules apply.
This article provides general tax information for FY2025–26. CGT concession rules are complex. For advice tailored to your situation, speak with a registered tax agent or accountant. Find one through the Tax Practitioners Board register.