Small Business CGT Concessions
Special CGT concessions for small businesses with turnover under $2 million or net assets under $6 million, potentially reducing CGT to zero.
The small business CGT concessions are a suite of four concessions that can significantly reduce or eliminate CGT for eligible small business owners when they sell active business assets. To qualify, you must have an aggregated turnover of less than $2 million, or net CGT assets of no more than $6 million. The asset being sold must be an "active asset" — one used in or connected with a business. From 2027-28, the 50% active-asset reduction alone stops applying that $2 million overlay — its turnover gateway becomes the ordinary small business entity test of under $10 million aggregated turnover — while the other three concessions keep the $2 million turnover / $6 million net-asset tests.
The four concessions are: (1) the 15-year exemption — if you've owned the asset for 15+ years and are retiring or permanently incapacitated, the entire gain is exempt; (2) the 50% active asset reduction — reduces the capital gain by 50%, and for a disposal before 1 July 2027 it stacks on top of the individual 50% CGT discount (potentially reducing the taxable gain to 25%); (3) the retirement exemption — up to $500,000 lifetime of capital gains can be exempt (must go into super if you're under 55); and (4) the small business rollover — allows you to defer the gain for up to 2 years (or longer if you acquire a replacement asset).
These concessions can be applied in combination and in any order to minimise tax. For example, a small business owner selling a business asset held for more than 12 months before 1 July 2027 could apply the individual 50% CGT discount, then the 50% active asset reduction, and finally the retirement exemption — potentially paying zero CGT on the sale. The four small business concessions survive the 2026 CGT reform, but the individual 50% discount at the front of that stack does not: for disposals from 1 July 2027 the stack starts with the active asset reduction instead. These concessions are among the most generous in the Australian tax system.
How it works
The small business CGT concessions are a set of four separate reliefs that stack on top of the ordinary CGT rules, available once you clear one of two eligibility gateways — an aggregated turnover under $2 million, or net CGT assets no greater than $6 million — and the asset being sold passes the active asset test, meaning it's genuinely used in or connected with running the business rather than held passively. From 2027-28, the 50% active-asset reduction alone stops applying the $2 million overlay: its turnover gateway becomes the ordinary small business entity test of under $10 million aggregated turnover. The other three reliefs keep the $2 million turnover / $6 million net-asset tests. Each concession works differently: the 15-year exemption wipes out the gain entirely for a long-held asset when the owner is retiring or permanently incapacitated; the 50% active asset reduction halves the gain again, on top of the ordinary discount where one is still available; the retirement exemption lets a lifetime total of gains go tax-free up to a cap; and the small business rollover defers the gain by letting you roll it into a replacement asset.
In practice, these concessions get applied at the point of selling a business or a business asset, and a business owner working with an accountant will typically stack several concessions in sequence to minimise the final tax bill — the order matters, because each concession is calculated on the gain remaining after the previous one has been applied. This makes the sale of a business one of the more consequential planning events in a small business owner's tax life, since getting the eligibility tests and the sequencing right can be the difference between a substantial tax bill and close to none.
The retirement exemption has its own quirk worth knowing: the lifetime cap is $500,000, and if the business owner is under 55 at the time, the exempt amount must be paid into superannuation rather than taken as cash, which links this concession to retirement savings rules as much as to CGT. Because the concessions can be applied in combination and in different orders, a business owner who has held an active asset for the required period and sells before 1 July 2027 might apply the ordinary 50% CGT discount, then the 50% active asset reduction, then the retirement exemption, reducing what started as a large capital gain down toward zero — but each layer only applies if its own specific eligibility conditions are separately satisfied. The four small business concessions survive the 2026 CGT reform; the ordinary 50% discount at the front of that stack does not, so for a sale from 1 July 2027 the stack starts with the active asset reduction instead.
Example: stacking concessions on a $400,000 business sale gain
A 58-year-old sole trader with turnover under $2 million sells an active business asset held for more than 12 months, realising a $400,000 capital gain.
On a sale before 1 July 2027, applying the ordinary 50% CGT discount first reduces the gain to $200,000. Applying the small business 50% active asset reduction on top of that halves it again to $100,000. If the owner then applies the retirement exemption up to its lifetime cap, the remaining gain can be reduced further — potentially to close to zero, well within the $500,000 lifetime retirement exemption limit.
Calculate it yourself
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Capital Gains Tax (CGT)
Tax on the profit made from selling or disposing of an asset, such as property, shares, or cryptocurrency.
50% CGT Discount
A 50% reduction in capital gains for individuals and trusts who held the asset for at least 12 months before disposal.
Sole Trader
An individual who runs a business in their own name, reporting business income and expenses in their personal tax return.
Company Tax Rate
The flat rate of tax applied to company profits — 25% for base rate entities (turnover under $50 million) and 30% for others.
Cost Base
The total cost of acquiring and holding an asset, used to calculate the capital gain or loss on disposal.