The small business CGT concessions are four separate tax concessions that can reduce or defer the capital gain a business owner makes on the sale of an active business asset, and in some cases remove it entirely. They are the 15-year exemption, the 50 per cent active asset reduction, the retirement exemption and the small business rollover. All four sit behind the same set of basic eligibility conditions, and a seller who clears them can stack more than one on the same gain in a set order.
This guide covers how each concession works, the order they apply in and the super interaction. It is general information from Alteris Accounting, and whether any of it applies to a particular sale is a question for a registered tax agent.
The basic conditions come first
No concession is available until the basic eligibility conditions are met. There must be a CGT event that produces a capital gain, such as selling business premises, goodwill, shares or a partnership interest, and depreciating assets are excluded because any gain on them is taxed as income under the capital allowance rules.
There are two ways in. The turnover route asks whether you are a CGT small business entity, judged on the aggregated turnover of you, your affiliates and connected entities. The asset route asks whether you pass the maximum net asset value test on the combined net market value of that group’s CGT assets just before the event. The ATO publishes the current threshold and limits.
The net asset value test includes the group’s whole CGT asset base, which also includes investment assets. An individual leaves out personal-use assets, the private-use portion of their home, super and life insurance.
Affiliates and connected entities widen both tests
An affiliate is an individual or company that, in their business affairs, acts or could reasonably be expected to act on your directions or wishes, or in concert with you. A connected entity is one you control, one that controls you, or one under common control, and control of a company generally means you and your affiliates together hold at least 40 per cent of the voting power, income or capital.
Close family is where this surprises people, because a spouse or adult child who habitually acts on the owner’s wishes can be an affiliate, pulling their turnover and assets into both tests.
The asset must be an active asset
An asset is active if you, your affiliate or a connected entity uses it, or holds it ready for use, in carrying on a business, or if it is an intangible asset inherently connected with the business. It must have been active for at least half the period you owned it, capped at seven and a half years for assets held longer than 15 years, and the active period need not be continuous.
Assets whose main use is deriving rent are generally not active unless the rental use was temporary, while an asset leased to your own connected entity or affiliate can still be active.
Shares and trust interests carry extra tests
Selling shares in a trading company or units in a trust adds a second layer. The share or interest is only an active asset where the company or trust passes an asset composition test, meaning active assets and inherently connected cash and financial instruments make up most of its market value, and just before the sale you must be a CGT concession stakeholder or the stakeholders together must hold almost all of its small business participation percentage.
A significant individual holds a small business participation percentage of at least 20 per cent, directly or through other entities, and a CGT concession stakeholder is a significant individual or the spouse of one with any percentage above zero. For a company, the percentage is the smallest of voting, dividend and capital rights, so dividend access or non-voting shares are worth reviewing with a registered tax agent before a sale.
What each concession does
| Concession | What it does |
|---|---|
| 15-year exemption | Disregards the whole capital gain |
| Active asset reduction | Halves the gain that remains after losses and the general CGT discount |
| Retirement exemption | Disregards the gain up to a lifetime limit per individual |
| Small business rollover | Defers the gain while a replacement active asset is acquired |
The 15-year exemption removes the whole gain
It is the only concession that removes the gain outright with no cap, and it applies before capital losses, so a loss made elsewhere stays available. It requires the basic conditions, 15 years of continuous ownership ending just before the CGT event, and either being 55 or older with the event in connection with your retirement, or permanent incapacity at any age.
Whether a sale is “in connection with retirement” turns on the facts, and the ATO looks for at least a significant reduction in hours or a significant change in activities. A company or trust must also have had a significant individual for at least 15 years of the ownership period and can pass the exempt amount to a CGT concession stakeholder within two years of the event without it being assessable.
The active asset reduction halves what is left
This is the simplest of the four. Once the basic conditions are met, the remaining gain is halved, with no extra age, retirement or ownership conditions, and it applies automatically unless you choose for it not to.
Declining it is sometimes deliberate, because a company or trust may prefer to run a larger amount through the retirement exemption and pay it out to stakeholders. Which path produces the better result is a calculation for a registered tax agent before the return is lodged.
The retirement exemption has a lifetime limit
The retirement exemption disregards capital gains up to a lifetime limit, currently $500,000 per individual, or per CGT concession stakeholder where a company or trust holds the asset. Section 152-320 of the Income Tax Assessment Act 1997 fixes the amount and does not index it, and amounts used on an earlier sale reduce what is left. You do not need to retire, stop working or wind up the business to use it.
Age drives the super requirement. Someone under 55 just before making the choice must pay the exempt amount into a complying super fund or retirement savings account, while someone 55 or older has no obligation to contribute. Companies and trusts must pay the exempt amount to at least one CGT concession stakeholder, and those payments are not assessable to the recipient.
The small business rollover defers the gain
The rollover keeps the gain out of your assessable income while you acquire a replacement active asset or make capital improvements to an existing one. The replacement asset period runs from one year before the CGT event to two years after it, and the ATO can extend it on application.
The deferral unwinds through its own CGT events where no replacement asset is acquired in time, where the rollover amount exceeds what was spent, or where the replacement asset’s status later changes. A gain crystallising through the first two concessions, can be run through the retirement exemption without meeting the basic eligibility conditions again.
The concessions apply in a fixed order
The sequence changes the arithmetic, so the ATO sets it out as steps. The 15-year exemption is tested first and, where it applies, the whole gain goes. Otherwise, capital losses are offset, the general CGT discount applies for individuals and trusts on assets held at least 12 months, then the active asset reduction, then the retirement exemption, the rollover or a mix of both.
Companies cannot use the general discount, and complying super funds use a lower rate which the ATO publishes. Three of the four concessions must be chosen before the return for the year of the CGT event is lodged, and the retirement exemption also needs a written record of the exempt amount.
Proceeds contributed to super count against a separate cap
Amounts from the 15-year exemption and the retirement exemption can go into super without counting against the non-concessional contributions cap, because they count against the CGT cap amount instead, a separate lifetime cap which the ATO indexes and publishes. Amounts reduced under the active asset reduction cannot be contributed under the CGT cap.
The fund must be notified on the CGT cap election form no later than the contribution itself, or the contribution falls into the non-concessional cap and can produce excess contributions. The contribution also has its own deadline, which is tied to lodging the return for the year of the CGT event or to receiving the proceeds.
Whether a contribution suits a particular person depends on their objectives, financial situation and needs. A licensed financial adviser at Alteris Financial Group can look at that as part of a wider superannuation strategy, once a registered tax agent confirms the CGT cap treatment.
The law changes from 1 July 2027
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received Royal Assent on 26 June 2026, keeps all four concessions and lifted the turnover test for the active asset reduction so that more businesses can use it, from the income year that starting 1 July 2027. From that date the Act also replaces the flat CGT discount for individuals and trusts with cost base indexation and a minimum tax rate, while complying super funds keep their existing discount. The ATO’s summary of the reform has more detail.
An asset held on 30 June 2027 is treated as sold and reacquired at market value on that date, with the gain deferred until the asset is later sold. The deemed sale is ignored when testing the small business concessions, so 15-year continuous ownership is not broken.
The concessions after a death
The concessions do not end at death. Where a gain is made within two years of a death on an asset from the estate, the 15-year exemption can be available to the legal personal representative, a beneficiary or a surviving joint tenant, the event does not have to be in connection with retirement, and the deceased must have been 55 or older just before death.
The retirement exemption also carries across to the extent the deceased would have been entitled to it, with the super contribution requirement lifted even where the deceased was under 55. There are separate rules for inherited homes and investment properties. Refer to the guide CGT on inherited property.
Where to get help
How the concessions apply to a particular business turns on the entity, the asset’s history and the group’s asset base, so the question belongs with a registered tax agent, and Alteris Accounting works with business owners on the tax side of a sale. Wider background sits in the guide to tax concessions for small businesses and the accounting and tax insights, and owners planning an exit often pair the sale with estate and succession planning.
Frequently asked questions
What is the 15-year CGT exemption for small businesses?
It disregards the whole capital gain on an active asset you have continuously owned for at least 15 years. You must also meet the basic eligibility conditions and be 55 or older and the sale is in connection with your retirement or be permanently incapacitated at any age.
What is the small business active asset reduction?
It halves the capital gain that remains on an active asset after the application of capital losses and the general CGT discount. It has no extra conditions beyond the basic eligibility tests and applies automatically unless you choose otherwise.
What does the ATO count as a small business for these concessions?
A CGT small business entity is an individual, partnership, company or trust carrying on a business with aggregated turnover, including affiliates and connected entities, under the threshold the ATO publishes. An entity above the threshold may still qualify through the maximum net asset value test.
Do you pay capital gains tax after owning a business for 15 years?
Fifteen years of continuous ownership is one condition of the 15-year exemption and on its own does not remove the gain. You must also satisfy the basic eligibility conditions, pass the active asset test, and meet the age and retirement or incapacity requirements.
How much is the small business retirement exemption?
It disregards capital gains up to a lifetime limit which currently is $500,000 per individual, or per CGT concession stakeholder where a company or trust holds the asset. The amount is fixed in the legislation and does not index. If the exemption was applied earlier, this amount reduces what is left.
Are small businesses exempt from the CGT changes from 1 July 2027?
No, though the four concessions are retained and the turnover test for the active asset reduction rises for the income year 1 July 2027onwards. The wider change replacing the flat CGT discount with cost base indexation and a minimum tax rate still impacts individuals and trusts from that date.
What happens to a business asset I already own on 30 June 2027?
An asset held on 30 June 2027 is treated as sold at market value just before 1 July 2027 and reacquired on that day, with the gain or loss deferred until you sell. It is ignored when testing the small business concessions, so a market value at 30 June 2027 is the practical step to raise with a registered tax agent.
Important information
Alteris Accounting Pty Ltd (ABN 70 637 095 946) Tax Agent No.26024813. The information contained in this article is general in nature and does not take into account your personal tax circumstances. We recommend you consult an accountant or tax agent whose advice will take into account your particular tax affairs.
Rates and thresholds cited are current at the date of publication and are subject to change. Check the responsible authority for current figures.
Last updated: October 2026
