The small business CGT concessions in Australia are four tax concessions that may reduce or defer a capital gain when an eligible business owner sells an active business asset. They include the 15-year exemption, the 50% active asset reduction, the retirement exemption and the small business rollover. Which relief applies depends on the asset, ownership and eligibility tests.

If you’re a Perth business owner, working out which small business CGT concessions in Australia may apply can feel like decoding an ancient Roman law code. The key is to look beyond the sale itself: your business structure, how the asset is used and the relevant eligibility tests all matter.

This guide explains what the concessions do, how the retirement exemption works and which eligibility tests may apply, including rules for assets held through other entities. You’ll get a clearer view of the options before considering how a sale or business transition could affect your tax position.

What are the small business CGT Concessions?

Australia’s small business CGT concessions can reduce, disregard or defer a capital gain when eligibility requirements are met. For an owner planning a sale or restructure, the 50% active asset reduction is one option to examine alongside the other concessions.

Active asset reduction

The small business active asset reduction can reduce an eligible capital gain by 50%. The rules require the asset to meet the active asset test and generally to have been owned for at least 12 months. If the conditions are met, the reduction follows any applicable general CGT discount unless you choose not to apply it. That order can change the amount left to assess.

In practical terms, the reduction may make a difference when selling a business asset, but it does not apply simply because an asset belongs to a business. The asset and the taxpayer must meet the relevant eligibility tests. The separate general CGT discount rules are stated to change from 1 July 2027, so the timing of a gain may also matter.

Active asset eligibility

An active asset is used, or held ready for use, in carrying on a business. For an asset owned for 15 years or less, it generally must satisfy the active asset test for at least half the ownership period. Companies and trusts may also face a modified test: active assets must meet an 80% threshold of the relevant market value of assets.

Consider a workshop used in daily business operations. Its business use is relevant to the test, while an asset held for private purposes may not qualify on that basis. Some assets cannot be active assets under section 152-40(4)(e) of the Income Tax Assessment Act 1997. Reviewing the asset’s use and ownership history helps identify issues before a sale.

Deferring gains through the rollover concession

The small business rollover concession can defer all or part of a capital gain from selling an active asset. The deferral can last for two years, or longer where qualifying replacement-asset or capital-improvement conditions are met. It postpones the gain rather than permanently removing it, so the replacement asset and later events matter.

For example, an eligible business owner selling an active asset may use the rollover concession when acquiring a qualifying replacement asset within the relevant period. If no replacement asset is acquired within two years, the deferred gain is taxed at the end of that period. The rollover can defer a gain during a transition between business assets, but it does not make the gain permanently exempt.

Other concessions include the 15-year exemption and retirement exemption, each with separate conditions. The 15-year exemption is applied first when the taxpayer qualifies; otherwise, the usual sequence starts with capital losses, then any general CGT discount, followed by small business concessions. Eligible taxpayers may choose which available concessions to use, rather than applying every option automatically.

For your tax return, keep clear records to support the concession claimed. Identify the asset and sale, calculate the capital gain, account for applicable losses and discounts, and report the concession used. These steps make the claim and its calculation easier to follow.

Retirement exemption

The small business retirement exemption can help eligible owners deal with a capital gain when planning a business exit or transition. It has a lifetime limit and specific payment rules, so the owner’s age and business structure matter. As with any transfer, document the decision and the details behind it.

How the retirement exemption works

According to the Australian Taxation Office, the small business retirement exemption can disregard capital gains up to a lifetime limit of A$500,000. The limit applies across an individual’s lifetime, not separately to each sale. An owner who has already used part of the limit has only the remaining balance available for a later eligible gain.

Age affects what happens to the exempt amount. If you’re under 55 when choosing the retirement exemption, you must contribute the exempt amount to a complying superannuation fund or retirement savings account. That contribution rule connects the tax relief to retirement savings, rather than leaving the amount freely available as personal cash.

For a company or trust, the payment process involves a CGT concession stakeholder. The entity must make the specified payment within 7 days of making the election, subject to an alternative timing condition. This means the decision needs to account for both the individual’s position and the entity’s steps. Keep the election and payment records together.

How the 15-year exemption differs

The 15-year exemption can disregard the entire capital gain on an eligible business asset, but it has distinct conditions. Generally, the asset must have been owned continuously for at least 15 years. The relevant person must be 55 or over and retiring, or meet the permanent incapacity condition.

This exemption is not the same as the retirement exemption’s lifetime cap. For example, an owner who meets the 15-year ownership and retirement conditions may be eligible to disregard the gain under that exemption. An owner who doesn’t meet those conditions may need to consider another concession, including the retirement exemption, if its separate requirements are satisfied.

Trust exemptions and stakeholder payments

A trust does not qualify for retirement relief simply because it owns a business asset. It must satisfy the applicable CGT requirements, including the relevant stakeholder and payment rules. Any payment to a CGT concession stakeholder should align with the trust’s election and its documented allocation of the exempt amount.

Before lodging a return, map out the asset sale, the trust’s gain, the stakeholder receiving an amount, and any super contribution required. Those records help explain how the exemption was calculated and applied. If the retirement decision also involves a sale or restructure, tax planning for business transitions can help you consider its broader tax implications.

Eligibility issues for shares held through interposed entities

Share ownership through a company or trust can add an extra layer to the CGT eligibility criteria. Capital losses are applied first, then the general CGT discount where available, followed by eligible small business concessions; the 15-year exemption is applied first if you qualify.

Share eligibility through interposed entities

An interposed entity sits between an individual stakeholder and the company whose shares are being sold. This structure can make it important to examine how ownership interests are linked when assessing whether shares qualify as active assets for the concessions.

The modified connected entity rule refers to a 20% small business participation percentage in a later entity. Where an interposed entity sits between CGT concession stakeholders, the 90% test applies. These tests examine ownership links through the structure, not just the name on the share register.

Each entity’s place in the ownership chain matters. Map the individuals, trusts and companies, then trace who owns or participates in each entity. A break in that chain can affect eligibility, even if the underlying business appears to meet other conditions.

Eligibility conditions and turnover thresholds

For the general small business CGT turnover test, aggregated annual turnover must be less than A$2 million. Aggregated turnover means the business is considered alongside relevant connected entities and affiliates, rather than assessed in isolation.

Turnover is only one eligibility route. The maximum net asset value test is another, while share claims can also depend on participation and interposed-entity tests. Meeting one threshold does not establish eligibility if a separate condition attached to the ownership structure is not met.

For example, Joe has owned all shares in ABC Pty Ltd for 5 years. That ownership period alone doesn’t establish whether a concession applies. The business’s turnover, the share’s active-asset status and any entities between Joe and ABC Pty Ltd can each affect the assessment.

The discount and concessions work in a defined order. First account for capital losses, then apply an available general CGT discount, and then consider eligible small business concessions. If the 15-year exemption applies, it is considered first. Companies can’t claim the general CGT discount, so the taxpayer and ownership structure matter.

Before lodging a claim, document the ownership chain, each entity’s role, relevant participation interests and the turnover figures used. Keep share and business records to support these details. A clear audit trail helps connect the original transaction to the final capital gain.

Maximum net asset value test

The maximum net asset value test is an alternative eligibility pathway for small business CGT concessions. It compares the combined net assets of your business and related entities with the A$6 million limit. For Perth business owners, that means looking beyond one company’s balance sheet before relying on the test.

To qualify under this test, the combined net assets must not exceed A$6 million. That limit is not a turnover figure or the value of the asset being sold. It concerns the net assets considered across the business and related entities. A business that exceeds the turnover threshold may still examine this pathway, but it must meet the asset limit and other relevant eligibility conditions.

Start by identifying the entities connected with the business and gathering their asset and liability records. The maximum net asset value test considers net assets, so liabilities matter. Looking at one company alone may miss assets held elsewhere in the structure. Include the relevant group entities in your review.

Pay attention to passively held assets too. An investment or property not used in daily business operations may still affect the net asset calculation if held by the business or a related entity. Don’t assume an asset is excluded just because it isn’t active. Its ownership, connection to the group and treatment under the test all matter.

The active asset test and maximum net asset value test answer different questions. Business use can affect whether an asset is active, while the net asset value test considers the combined position of relevant entities. A passive investment may therefore affect the net asset test even if it does not support an active asset claim.

For example, the guide’s Joe example has net assets of A$5 million, excluding personal assets such as his home and superannuation fund. That figure sits below the A$6 million threshold. The example shows why separating personal assets from the business calculation can matter, but it doesn’t replace reviewing the ownership and relevant entity structure in your own case.

Before calculating capital gains tax relief, set out each relevant entity, its assets and liabilities, and the basis for including them. Keep supporting records that show how the combined net figure was reached. Then compare it with A$6 million and assess the other concession conditions separately. A CGT discount or another concession doesn’t remove the need to satisfy this test where you rely on it.

Overview of the small business CGT concessions

Australia’s small business CGT concessions can reduce, disregard or defer a capital gain when the business, asset and taxpayer meet the relevant conditions. The Federal Register of Legislation sets them out in Subdivision 152-A of the Income Tax Assessment Act 1997. Think of the rules as a Roman toolkit: each concession has a different purpose, and eligibility determines which tools fit.

The four concessions address different outcomes. The 15-year exemption can disregard an eligible gain when its ownership, age and retirement conditions are met. The active asset reduction can reduce an eligible gain by 50%. The retirement exemption can disregard gains within its lifetime limit, while the small business rollover can defer all or part of a gain.

Eligibility begins with the business and the asset, not simply the fact that a sale happened. A taxpayer may qualify as a CGT small business entity with aggregated turnover below A$2 million, or through the maximum net asset value test, which has a A$6 million limit. Each route has its own conditions, and connected entities can affect the assessment.

The order of calculation matters. First apply capital losses. Then consider the general CGT discount, if available, followed by the small business concessions. If the 15-year exemption applies, it comes first. Eligible taxpayers aren’t required to use every concession available; the right combination depends on their circumstances and the intended outcome.

That distinction can shape a sale or restructure. A business owner selling an active asset may consider a reduction in the capital gain, while someone replacing a business asset may consider deferring a gain through rollover relief. The retirement exemption may be relevant to an eligible retirement. These options serve different purposes, so consider whether your goal is to reduce tax, disregard a gain or defer it.

A separate restructure rollover may apply to eligible businesses with aggregated turnover below A$10 million, subject to other requirements. It can allow qualifying assets to move between entities without an immediate income tax liability. That rollover is distinct from the CGT concessions for a sale, so identify whether the transaction is a genuine restructure or a disposal. When navigating entity restructuring or asset sales, consulting commercial legal specialists such as Aquarius Lawyers helps ensure that contracts and structural changes remain legally sound.

From 1 July 2027, the general CGT discount rules are stated to change. The stated changes preserve the old 50% discount for business value built up before that date, regardless of when the business is sold. Keep records that support the asset, ownership, turnover and concession claimed, then match the evidence to the calculation in the tax return.

Venta Belgarum: Business consulting

Venta helps business owners connect tax decisions with their business goals. For owners in Mount Pleasant, Applecross, Attadale, Brentwood, Booragoon, South Perth and Como, business consulting and tax advisory can help clarify how relevant CGT tests relate to a sale, retirement or restructure.

Support can also include business and personal tax preparation services or Business Advisory Packages. Venta’s advice helps make the numbers easier to understand, so you can weigh your options with greater confidence.

For a clearer view of your next business and tax decisions, visit Venta Belgarum.

Make your next business move with clarity

A sale, restructure or retirement can affect more than your tax position. It can shape the time, freedom and financial control you want in the next chapter. A clear plan for small business CGT concessions in Australia connects the tax decision to what you want your business and personal life to look like afterwards, whether you are planning future ventures or organizing personal estate planning documents with Aiker Wills and Trusts.

If you’re feeling unheard or stuck with unanswered questions, a clear conversation can help you see a way forward. Venta offers business consulting, tax advisory, and business and personal tax preparation services to help you approach these decisions with greater clarity.

Your next step doesn’t have to feel like a march through the Roman Forum alone. Understand how the rules relate to your plans, then move forward with a clearer view of your options.

Frequently Asked Questions

What are the Australian small business CGT concessions?

They are tax concessions that can change how an eligible business-related capital gain is treated. The four options can reduce a gain, disregard it, or defer it. Australia’s rules sit in Division 152 of the Income Tax Assessment Act 1997. For a business owner planning a sale, the useful starting point is identifying what is being sold: business assets, shares, or an interest held through another entity can involve different eligibility considerations.

What are the eligibility requirements for the small business CGT concessions in Australia?

Eligibility depends on the taxpayer, the asset and the business structure. A claim generally requires an eligible business connection and an asset that meets the relevant active asset rules. The taxpayer must also satisfy an applicable small business or net asset test, along with any conditions specific to the concession. For a share sale, examine the ownership chain and participation interests, not just the operating company’s activity.

What is the $2 million aggregated turnover test for small business CGT concessions?

The turnover pathway requires aggregated annual turnover of less than A$2 million. “Aggregated” matters: the assessment can include relevant connected entities and affiliates, so a single business’s sales may not show the full picture. For example, an owner with interests across related operations needs to consider those relationships when working out which turnover figures are relevant for the income year being assessed.

How does the $6 million maximum net asset value test work?

The test compares the taxpayer’s relevant net assets with the A$6 million ceiling. It takes account of the business and related entities, so consider assets and liabilities across the relevant group rather than relying on one company’s accounts. A useful working paper lists each entity, the assets it holds, associated liabilities and why each item belongs in the calculation. Personal assets may be treated differently from business assets.

What are the four small business CGT concessions and how do they reduce capital gains tax?

The four concessions are the 15-year exemption, the 50% active asset reduction, the retirement exemption and the small business rollover. Depending on the conditions, they can disregard an eligible gain, reduce it, or defer it. They aren’t interchangeable: rollover relief postpones recognition, while an exemption can remove a qualifying gain. Taxpayers may choose among concessions they qualify for rather than automatically applying every option.

How does the 15-year exemption apply to small business CGT assets?

The 15-year exemption can disregard the entire capital gain when the relevant conditions are met. Generally, the asset must have been owned continuously for at least 15 years. The relevant individual must be at least 55 and retiring, or satisfy the permanent incapacity condition. This makes ownership history important: records showing when the asset was acquired and how the business transition connects to retirement can support the claim.

How does the small business retirement exemption work and what is its lifetime limit?

The retirement exemption can disregard eligible capital gains up to a lifetime limit of A$500,000, according to the Australian Taxation Office. The limit is cumulative, so earlier use affects what remains available for a later gain. If you’re under 55 when choosing this exemption, the exempt amount must be contributed to a complying superannuation fund or retirement savings account. Keep records of previous claims and the required contribution.

What active asset tests, ownership rules and time periods apply?

An active asset is used, or held ready for use, in carrying on a business. For assets owned 15 years or less, the active asset test generally must be met for at least half the ownership period. The 50% active asset reduction also requires at least 12 months’ ownership. A 15-year exemption has a separate continuous ownership requirement, so distinguish the asset’s use history from its ownership timeline.