Small Business CGT Concessions Survive the 2027 Reform — Here's What's Retained

General information only. This is not tax or financial advice. Consult a registered tax agent for advice specific to your situation.

Budget 2026 ended the general 50% CGT discount for individuals, trusts and partnerships from 1 July 2027 — replacing it with cost base indexation plus a 30% minimum tax on real capital gains (see CGT Discount Reform: Cost Base Indexation + 30% Minimum Tax for the full mechanics). But Budget Paper No. 2 (p.21) carves the four small business CGT concessions in Division 152 of the tax law (the small business CGT concessions) out of the reform entirely.

The short version: If you run a small business and sell its assets — your ute, your tools, your shop premises, your goodwill — Budget 2026 changed NOTHING for you. The four small business CGT concessions are 100% preserved. The 50% discount that disappeared was the GENERAL one, used by share investors and property investors.

Are you a small business? Two tests, and you only need ONE: (a) business turnover under $2 million/year, or (b) total business + related-entity assets under $6 million when you sell. If you tick either box, you’re in.

For a sole trader, partner, family-business shareholder or trust beneficiary selling an active business asset (just means: something you actually use in your business) on or after 1 July 2027, the tax outcome under Division 152 of the tax law (the small business CGT concessions) is unchanged. No cost base indexation. No 30% minimum tax. No split-treatment apportionment. The legacy rules continue in full.

Below: five worked examples (metalwork sole trader, tradie’s ute and tools, cafe owner with premises and goodwill, farmer after 37 years, contractor combining concessions) — plus one cautionary example where the carve-out does not apply.

Timeline — what changes (and doesn’t) for small business owners

The reform is dated — 1 July 2027 is the switchover for everyone else. For small business owners, almost nothing on this timeline is a deadline you need to act on. The point of the table is the opposite: it shows what DIDN’T change, so you can confirm your plan still works.

Date	What happens	What it means for you
12 May 2026	Budget 2026 announces the general CGT reform.	If you own a small business with active business assets, your tax position is unchanged. The reform targets investment-asset gains, not business-asset gains.
From 12 May 2026	No need to accelerate business asset sales.	Unlike share and property investors, small business owners gain nothing from selling before 30 June 2027. The four concessions apply equally before AND after the reform date.
2026-27 income year (1 Jul 2026 – 30 Jun 2027)	Final year of the general 50% CGT discount for investment assets.	If you ALSO hold investment assets personally (ASX shares, rental property, crypto), the general reform affects those — but your business asset disposals are isolated from it.
30 June 2027 (Wednesday)	Reform changeover for investment assets.	Small business CGT concessions continue unchanged from this date. Division 152 of the tax law remains in place; the 15-year exemption, 50% active asset reduction, retirement exemption, and rollover relief all apply identically before and after.
1 July 2027	General reform starts for investment assets (cost base indexation + 30% minimum tax).	Treasury fact sheet confirms small business CGT concessions are not subject to the new cost base indexation regime and not subject to the 30% minimum tax. The legacy nominal-gain basis continues.
From 1 July 2027	Sole traders selling business + investment assets together face a SPLIT treatment.	If you sell a business in 2030 AND a personal share portfolio in the same year, the business asset gains use small business concessions (legacy) while the share gains use the new reform regime. Two-track CGT planning.
From 1 July 2027	The 50% active asset reduction now stands alone.	Pre-reform: gross gain → general 50% discount → 50% active asset reduction = 25% taxable. Post-reform: gross gain → 50% active asset reduction = 50% taxable. The “quarter-tax” outcome becomes a “half-tax” outcome — UNLESS you also qualify for the retirement exemption or 15-year exemption, which can wipe the remaining gain entirely.
The 15-year exemption clock is unchanged	No new acquisition-date rule, no reset, no transitional cap.	If you bought your business asset on 15 April 2010 (16+ years ago), the 15-year exemption already applies and the reform doesn’t matter for you. Same as it was.
31 October 2028	First tax return covering a post-reform small business disposal (2027-28 income year).	The tax outcome for a small business owner selling in 2027-28 looks identical to a 2026-27 sale, as long as the four concessions apply. Same forms, same worksheets, same labels.
Going forward	Recordkeeping rules for active assets are unchanged.	The $6 million asset test, $2 million turnover test, active asset use period (50% of holding period or 7.5 years), and connected-entity rules all continue exactly as before. Keep the same evidence file you’ve always kept.

If you sell a business asset on any date in this table, the concessions you’d have claimed in 2026 are the concessions you claim in 2030 — same four levers, same eligibility gates, same paperwork.

How time changes your tax bill

For small business owners, the 1 July 2027 reform date is largely a non-event — the four small business CGT concessions are unchanged. But time still drives your tax outcome in three big ways:

1. The 15-year exemption clock — the cleanest path to $0 tax.
2. The active asset use period — half the holding period, or 7.5 years if the asset is held longer than 15 years (whichever is shorter at the long end).
3. The combined-concession arithmetic when you don’t have 15 years.

These three levers had the same mechanics before Budget 2026 and they still have the same mechanics after 1 July 2027. The reform doesn’t touch any of them. What it does do is make TIME the dominant variable for your tax bill — much more so than for individual investors, where time only partially mitigates the reform impact.

The 15-year exemption clock — time is your friend

The 15-year exemption gives you $0 tax on the entire gain if:

• You’ve owned the asset continuously for at least 15 years.
• You’re aged 55 or older at the disposal date.
• You’re disposing of the asset in connection with retirement (or are permanently incapacitated).
• The asset has been an active asset for at least the active-asset period (see below).

For an active asset acquired today (mid-2026), the 15-year clock ends mid-2041. If you’re 40 today buying a new business asset, you’ll be 55 at the 15-year mark — perfectly aligned with the retirement-connection test. If you’re 50 today, you’ll be 65 at the 15-year mark — comfortably eligible and a natural retirement age.

Worked sensitivity on acquisition timing:

Acquisition date	Earliest 15-yr eligibility (assuming owner ≥ 55)	What happens if sold earlier
1 Jan 2010	1 Jan 2025 (already eligible)	Use 15-year exemption today
1 Jan 2018	1 Jan 2033	Fall back to combined-concession math
1 Jul 2027	1 Jul 2042	New build — combined-concession math, plus the small business carve-out short-circuits the general reform
1 Jul 2035	1 Jul 2050	Long horizon; small business concessions still apply identically

Take Pete from Example 2. He’s selling at year 8, age 49 — way short of both gates. If Pete had instead held those tools, ute and goodwill another 7 years and waited until he was 56, the entire $74,000 gain would have disappeared under the 15-year exemption. The reform is irrelevant to that math; it was irrelevant before 2027 and it’s still irrelevant after.

The active asset use period — 50% of holding period, or 7.5 years if held > 15 years

You don’t need to use the asset as an active business asset for the FULL holding period — just more than half (if held 15 years or less), or at least 7.5 years (if the total hold exceeds 15 years).

So:

• A 12-year asset used as active for 7 years passes (7 > 6 = half of 12).
• A 20-year asset used as active for 8 years just barely passes (8 > 7.5).
• A 20-year asset used as active for only 6 years fails (6 < 7.5).

This means short non-business periods don’t necessarily blow up your claim. If Mei’s workshop had sat empty for 18 months during a renovation, or Bruce had leased the farm to a neighbour for a couple of years while recovering from injury, the active-asset clock still ticks — provided the cumulative active-use period clears the threshold.

The “7.5 years if held > 15 years” rule is the binding test for very long holds. A primary producer who farms for 8 years out of a 30-year hold passes (8 > 7.5). The same farmer who farms for only 7 years out of 30 fails — even though that’s 23% of the hold, the 7.5-year minimum is the constraint.

When 15-year exemption isn’t available — combined-concession math

For an asset held 8–14 years (or where the owner is under 55, or there’s no retirement connection), you fall back to the combined-concession path:

1. Apply any current-year and carry-forward capital losses.
2. Apply the 50% active asset reduction (halves the remaining gain).
3. Apply the retirement exemption (up to $500k lifetime cap; super contribution required if under 55).
4. Optional: defer any remainder via rollover relief into a replacement active asset.

Worked sensitivity on a $600,000 gain, holding the gain constant but flexing time and age:

Hold period	Owner age	Best path	Net taxable	What changes vs the reform
16 yrs	60	15-year exemption	$0	Reform irrelevant
16 yrs	50	50% active asset reduction + retirement exemption (contributed to super)	$0 ($600k → $300k → $0, $300k of lifetime cap used)	Reform irrelevant
10 yrs	55	50% active asset reduction + retirement exemption	$0 ($600k → $300k → $0, $300k of cap used; cash OK since 55+)	Reform irrelevant
10 yrs	45	50% active asset reduction + retirement exemption (contributed to super)	$0 ($600k → $300k → $0, $300k of cap used)	Reform irrelevant; retirement-exemption portion locked in super until preservation age
8 yrs	49	50% active asset reduction only (retirement exemption skipped to keep cash)	$300,000 at marginal rate	Reform irrelevant — the 50% active asset reduction is preserved

Across every row, the reform doesn’t bite. The 50% active asset reduction is a separately legislated provision Treasury retained. What flexes the outcome is age (55 = retirement exemption can be cash; under 55 = must go into super) and whether the owner is willing to lock cash into super.

Why time matters MORE for small business than for individual investors

Counterintuitive but true: time is more important for small business owners than for individual investors.

• For an individual share or property investor, time partially mitigates reform impact (longer pre-1 July 2027 hold = more legacy 50% discount on the pre-portion + more indexation on the post-portion). But the reform always applies — there’s no path to “$0 tax via time”.
• For a small business owner, time can cross the line between “limited concessions, pay marginal rate” (sub-15-year, under 55) and “full 15-year exemption, $0 tax” (15+ years, 55+, retiring).

A business owner selling at age 54 vs 55 has a dramatically different tax outcome. At 54, the retirement exemption is still available but the relief amount must be contributed to a complying super fund (no cash). At 55, the same relief can be taken in cash. That single-year age difference can change a $250,000 cash outcome into a $250,000 super outcome. Many small business owners deliberately work to age 55+ specifically to unlock the cleaner concession path.

Timing your business exit

• Best outcome: sell at age 55+, with 15+ years of continuous ownership, in connection with retirement. 15-year exemption applies. $0 tax. This is Mei, Lisa and Bruce in our worked examples.
• Second-best: sell at age 55+, with 10–14 years of ownership. 50% active asset reduction + retirement exemption (cash, since 55+) often gets to $0 anyway. Lifetime cap consumed but no super lock-up.
• Third: sell at any age under 55, with under 15 years of ownership. 50% active asset reduction + retirement exemption (super contribution required for the relief amount). Still often $0 taxable, but the retirement-exemption portion is locked away until preservation age. This is Marco.
• Worst outcome: sell at age under 55, with under 15 years of ownership, declining the retirement exemption (e.g. you want all cash now). Sole reliance on the 50% active asset reduction. You pay marginal rate on 50% of the gain. This is Pete — $37,000 taxable at marginal rate on a $74,000 gain.

Plan your timeline. The closer you can engineer the exit to “age 55+, 15+ years, retiring”, the cheaper the tax outcome — and reform vs no-reform doesn’t change any of that arithmetic.

Bottom-line summary

• The reform changes nothing for small business CGT outcomes — the four concessions are explicitly carved out.
• The 15-year exemption clock is the most valuable time lever. Start it ticking on any new active asset acquisition you make now.
• The 50% active asset reduction continues regardless of reform timing or holding period — but it’s only half-relief, not full.
• Age 55 is the meaningful threshold for retirement-exemption ease. Under 55, the relief amount must go into a complying super fund. At 55+, it can be taken in cash.
• A small business owner who also holds personal investment assets (ASX shares, rental property, crypto) faces the reform on those assets — but only on those. Two-track CGT planning, as Jenny’s example shows.

The four small business CGT concessions, briefly

The tax law packages four separate concessions for small business owners. You can stack some, you cannot stack others, and the order you apply them matters (see “Combining concessions” below).

• The 15-year exemption (Subdivision 152-B of the tax law) — full disregard of the entire capital gain if you have continuously owned the asset for at least 15 years, are aged 55 or older, and are disposing of the asset in connection with retirement (or are permanently incapacitated). No tax on the gain at all. No proceeds need to flow into super to claim it. This is the cleanest of the four when it applies — and it’s the one most small business retirees aim for.
• The 50% active asset reduction (Subdivision 152-C of the tax law) — a separate 50% discount on the gain that survives the general CGT discount step. Pre-reform it stacked on top of the general 50% discount; post-reform it stands alone (see next section).
• The retirement exemption (Subdivision 152-D of the tax law) — up to a $500,000 lifetime cap of capital gain disregarded if the proceeds are contributed to a complying super fund (or, if you are 55 or over, taken in cash). The cap is per individual, lifetime, across all retirement-exemption claims you ever make.
• Rollover relief (Subdivision 152-E of the tax law) — defer the CGT liability for up to 2 years if you reinvest the disposal proceeds into a replacement active asset (or improve an existing active asset). The deferred gain crystallises if the replacement isn’t acquired within the 2-year window, or if the replacement asset later ceases to be an active asset (i.e. you stop using it in your business).

From here on we’ll just call them the 15-year exemption, the 50% active asset reduction, the retirement exemption, and rollover relief — without the subdivision numbers cluttering every paragraph.

Why the 50% active asset reduction is the interesting one post-reform

Under the pre-reform stacking, a small business owner ran the calculation as: gross gain → general 50% CGT discount (halve) → 50% active asset reduction (halve again) → 25% of the nominal gain taxable. That 25% effective base is what made the 50% active asset reduction famous as the small business owner’s “quarter-tax” outcome.

Post-reform, for non-small-business individuals and trusts, the general 50% discount disappears — replaced by cost base indexation plus a 30% minimum tax on the real gain. But the small business 50% active asset reduction is a separately legislated provision, and Treasury explicitly chose to leave it in place. The Treasury fact sheet (Negative Gearing and Capital Gains Tax Reform, 12 May 2026) confirms small business CGT concessions are not subject to the new cost base indexation regime and not subject to the 30% minimum tax. They continue to operate on the legacy nominal-gain basis.

The practical effect: post-reform, a small business owner who applies the 50% active asset reduction alone ends up with 50% of the nominal gain taxable. That’s still a much better outcome than a non-small-business individual selling the same asset post-reform, who is exposed to indexation (helpful only for low-return assets) plus the 30% minimum tax floor.

Worked example 1 — Mei sells her metalwork workshop

Mei has run a sole-trader metalwork business since 1 February 2010. She bought a commercial workshop (her business premises) on the same day for $420,000. She sells the workshop on 1 February 2030 for $1,150,000, capital gain of $730,000. She is 58, retiring from the trade, has no other business assets, her total business + related-entity assets are comfortably under $6 million, and the workshop has been used as her active business premises (just means: actually used in the business) for the entire 20-year holding period.

Eligibility check.

• Holding period: 20 years (1 February 2010 → 1 February 2030). Exceeds the 15-year threshold.
• Age 55+: yes, Mei is 58.
• Retiring in connection with the disposal: yes.
• Active asset for at least half the holding period (or 7.5 years if held > 15 years): yes, the workshop has been continuously used as business premises (~20 years).
• $6 million asset test: yes (her total business + personal CGT assets sit under the threshold).

Concession applied — the 15-year exemption.

The entire $730,000 capital gain is disregarded. Tax payable on the CGT event: $0.

The 15-year exemption short-circuits all the other concessions and the reform regime alike. Mei doesn’t need to think about cost base indexation, the 30% minimum tax, the split-treatment apportionment, or even rolling the proceeds into super. The gain simply doesn’t appear on her tax return.

Alternative path — what if Mei had only owned the asset for 10 years?

She would fall out of the 15-year exemption but still qualify for the combined-concession path: $730,000 × 50% active asset reduction = $365,000 → retirement exemption ($500,000 lifetime cap) absorbs the full $365,000 if contributed to super (or taken in cash since she’s 55+) → net taxable: $0.

Critically, none of these steps involve cost base indexation or the 30% minimum tax. The reform doesn’t touch her calculation either way. The 15-year exemption is the cleaner administrative outcome when it applies, so it’s the path her accountant runs first.

Plain-English takeaway: Mei worked the trade for 20 years, retired in her late 50s, and walks away with $1.15m — zero tax. The Budget 2026 reform is irrelevant to her.

Worked example 2 — Pete the plumber sells his ute and tools

Pete has run a sole-trader plumbing business for 8 years. In 2029, at age 49, he decides to wind it down — his back’s playing up and he wants a break. He doesn’t qualify as “retiring” formally (under 55, not permanently incapacitated), so the 15-year exemption is off the table.

He sells:

• His Toyota HiLux work ute for $32,000 (cost base after depreciation: $18,000 → capital gain $14,000).
• His tool trailer, plumbing tools, and pipe-bending gear for $24,000 (cost base after depreciation: $9,000 → capital gain $15,000).
• His business name and small customer list for $45,000 (no cost base — built up from zero → capital gain $45,000).

Total capital gain: $74,000.

Pete’s annual turnover is $310,000 — well under the $2m test. He passes the small business eligibility gate.

Eligibility check. 8 years held (no 15-year exemption). Ute, tools and goodwill are all active assets, used in the business throughout. Turnover $310k passes the $2m test.

Concession path applied. The general 50% discount is gone from 1 July 2027, but the 50% active asset reduction is preserved.

• Step 1: Total gain $74,000.
• Step 2: No carry-forward capital losses.
• Step 3: 50% active asset reduction → $74,000 × 50% = $37,000 taxable gain.
• Step 4: Retirement exemption — Pete chooses NOT to claim (he’s 49, would need to lock the amount in super until preservation age, and prefers cash now).
• Step 5: No rollover (not buying replacement assets).

Net taxable gain: $37,000. Pete adds this to his other income for the year and pays his marginal rate on it.

Plain-English takeaway: Even though the GENERAL 50% discount is gone, the SMALL BUSINESS 50% reduction still applies to Pete’s ute, tools and goodwill. He pays tax on $37k, not $74k. The reform took nothing away from his calculation. If he’d sold the same dollar value as shares instead, he’d be exposed to indexation + the 30% minimum tax with no halving available.

Worked example 3 — Lisa sells her cafe in Newcastle (building + business)

Lisa has run a coffee shop in Newcastle since March 2014. She owns both the business and the building it operates from — she bought the shopfront when she opened.

In April 2030 (16 years later), at age 61, she decides to retire and sells both:

• The building (premises): cost base $620,000 (2014 purchase) → sale price $1,100,000 → capital gain $480,000.
• Business goodwill (customer base, brand, trained staff structure): cost base $0 → sale price $120,000 → capital gain $120,000.

Total capital gain: $600,000.

Her annual turnover is $890,000. Total business + personal CGT assets sit around $2.4m. She passes both small business tests easily.

Eligibility check. 16-year holding (both assets), age 61, retiring in connection with the sale, building occupied for her own business throughout (not rented out), turnover $890k and total assets $2.4m — passes both small business tests.

Concession applied — the 15-year exemption on BOTH assets.

• Building: $480,000 capital gain → 15-year exemption → $0 taxable.
• Goodwill: $120,000 capital gain → 15-year exemption → $0 taxable.

Total CGT payable: $0.

Compare: 2026 vs 2030 sale. Would Lisa have done better selling in 2026 (before reform)?

• 2026 sale (pre-reform): 12-year holding — would NOT have qualified for 15-year exemption. She’d have run the combined path: $600k → general 50% discount → $300k → 50% active asset reduction → $150k → retirement exemption → $0. Same outcome but more steps and $150k of lifetime cap consumed.
• 2030 sale (post-reform): 16 years, qualifies for 15-year exemption. Direct $0 in one step. Her $500k retirement exemption cap is still 100% intact for any future small-business sale.

The reform didn’t change Lisa’s tax bill in either scenario — both land at $0. But waiting past year 15 preserved her retirement exemption cap.

Plain-English takeaway: Building + goodwill, both active assets, both held 15+ years, retiring at 61 → entire $600k gain disappears. Owning the premises you trade from is one of the highest-leverage moves for a small business retirement exit.

Worked example 4 — Bruce the farmer sells his property after 37 years

Bruce bought a 200-hectare farm in 1992 for $180,000. He has farmed it continuously — beef cattle and some cropping — for 37 years. In 2029, at age 67, he sells the farm for $2,400,000 to retire.

Capital gain: $2,400,000 − $180,000 = $2,220,000.

Bruce’s annual turnover from the farm is about $420,000. His total business + personal assets (including the farm) sit around $2.9m. He passes both the $2m turnover test and the $6m asset test.

A pre-1985 cost base would NOT apply here — Bruce acquired in 1992, after CGT started (20 September 1985). So this is a normal CGT event.

Eligibility check. 37-year holding, age 67, retiring, farmed continuously throughout — active asset throughout — and total assets $2.9m under the $6m test.

Concession applied — the 15-year exemption.

The entire $2,220,000 capital gain is disregarded. CGT payable: $0.

Bonus: super contribution from the proceeds. Under the 15-year exemption, Bruce can also contribute into super from the disposal proceeds — excluded from his non-concessional cap, up to the CGT cap amount ($1.78m for 2025-26, indexed each year). This is on top of his regular contribution caps and lets him shift a big chunk of the farm sale into the tax-advantaged super environment for retirement income.

Bruce’s overall position: $2.4m in his pocket, $0 in CGT, and the option to contribute up to the CGT cap amount into super without using up normal non-concessional limits.

Plain-English takeaway: The 15-year exemption wipes out the whole $2.22m gain. Primary producers retiring after 15+ years on the land are some of the cleanest 15-year exemption cases — long holding periods, clear active-asset usage, age 55+ at exit.

Worked example 5 — Marco combines the 50% reduction and the retirement exemption

Marco runs a small electrical contracting business through a Pty Ltd company. He’s the sole director and shareholder. In 2028, at age 52, he sells the business goodwill (customer contracts, brand, trained-team handover) to a competitor for $440,000. Cost base: $0 (built from zero).

Capital gain: $440,000.

Marco’s company turnover is $1.2m; he passes the $2m test. His total business + personal CGT assets are about $4.1m — under the $6m threshold too. He passes both small business eligibility gates.

But Marco is 52 — too young for the 15-year exemption (which needs age 55+). And he hasn’t held the business for 15 years either (he started 9 years ago). So the 15-year exemption is doubly off the table.

Concession path applied — ordered stacking.

1. Capital losses first. Marco has $0 in carry-forward capital losses. Skip.
2. General 50% CGT discount. Gone from 1 July 2027 for individuals. (Note: would have been available pre-reform — he’d have applied it here. But under the new regime it’s irrelevant.)
3. 50% active asset reduction. $440,000 × 50% = $220,000 remaining gain.
4. Retirement exemption. $500,000 lifetime cap. Marco contributes $220,000 to his complying super fund (required because he’s under 55 — at 55+ he could take it in cash). Remaining lifetime cap after this claim: $280,000 (saved for a future small-business sale).
5. Rollover relief. Not applicable (he’s not reinvesting into a replacement active asset).

Final taxable gain: $0.

Marco contributes $220,000 to super (sitting in his retirement fund, tax-advantaged) and uses $220,000 of his lifetime retirement exemption cap. He keeps the other $220,000 from the $440k sale in cash.

Plain-English takeaway: Even at 52, with the general 50% discount gone, Marco gets to $0 taxable using the 50% active asset reduction + retirement exemption combo. The downside is he has to lock the retirement-exemption portion into super until preservation age. The upside is he pays no CGT and starts his super years ahead.

Worked example 6 — Where the carve-out does NOT apply (Jenny’s share portfolio)

Jenny is a sole trader who runs a small bookkeeping business with $180k of annual turnover. Comfortably under both the $2m and $6m tests. She passes the small business eligibility gate for HER BUSINESS.

But over the years she has also built a $4 million share portfolio in her personal name — blue-chip ASX shares, a few ETFs, and some international holdings. She calls it “her investment business” when chatting with mates at the pub. She sells $700,000 worth of shares in 2029 with a $300,000 capital gain.

Are her shares active assets? No. Shares held as personal investment do NOT qualify as active assets. The only exception is shares in a company that itself carries on a business with 80%+ active assets — and that’s not what Jenny is holding. Her shares are passive investments, not business assets.

Consequence: The small business CGT concessions do NOT apply. Her bookkeeping business is irrelevant — eligibility flows from the asset being sold, not who’s selling it.

Her $300,000 share gain falls under the general reform regime: cost base indexation on the post-1 July 2027 portion, 30% minimum tax on the real gain, no 50% general discount, no 50% active asset reduction (shares aren’t active assets), no 15-year or retirement exemption. Depending on her purchase dates and the indexation factor, Jenny will pay tax on something close to the full real gain — substantially more than she would have under the pre-reform 50% general discount.

Plain-English takeaway: Calling something “your investment business” doesn’t make it a business in the tax law’s eyes. Passive shares = general reform regime = full exposure to indexation + 30% minimum tax. The small business carve-out applies to things you USE in your trade or services business — premises, tools, vehicles, goodwill, plant — not to your share portfolio, your investment property, or your crypto.

Eligibility — you qualify if EITHER of two tests is met

All four concessions sit behind an eligibility gate. You qualify if EITHER your business has an annual turnover under $2 million, OR your total business + connected-entity assets are under $6 million when you sell. You only need to satisfy ONE.

The detail:

• Annual turnover under $2 million for the income year of disposal (the small business entity test), OR
• Total business + connected-entity CGT assets under $6 million at the time of the CGT event (the maximum net asset value test), OR
• You are a small business “affiliate” of an entity that satisfies one of those tests (e.g. spouse or related entity used in the business), OR
• You are a partner in a partnership that is a small business entity.

PLUS the asset itself must be an active asset (just means: something you actually use in your business) — used (or held ready for use) in carrying on the business — for at least:

• Half the holding period if held for 15 years or less, OR
• At least 7.5 years if held for more than 15 years.

These tests are independent: you can fail turnover but pass the asset test, or vice versa. Many medium-sized family businesses fail the $2m turnover test but pass the $6m asset test, especially after they’ve built up retained earnings or business goodwill over a decade.

Common gotcha: the $6m asset test includes assets of “connected entities” and “affiliates” — broadly, your spouse’s business assets, family trust assets, and assets held by a company you control. It’s not just the assets in the name of the entity selling. Worth a conversation with a tax agent if you’re close to the threshold.

Active asset definition — what counts

Tangible (physical) assets: business premises (Mei’s workshop), plant and equipment, fit-outs, vehicles (Pete’s ute), tools, land used in a primary production business (Bruce’s farm).

Intangible assets: business goodwill (Lisa’s brand and customer base, Marco’s customer contracts), customer lists, trademarks, patents and registered designs used in the business.

Excluded by default: shares held as personal investment (unless the underlying company itself runs a business with mostly active assets — see “look-through” below); interests in trusts (same look-through exception); assets held mainly to derive rent.

The “mainly to derive rent” exclusion catches a lot of would-be claimants. A sole trader’s separately-owned residential rental property does NOT qualify, even if it’s the only “business” asset on the balance sheet. Same with a commercial property you lease out to a third party for rent — that’s a rental investment, not a business asset.

But if you OPERATE FROM the building (like Lisa’s cafe premises), it’s an active asset — you’re using it in your business, not collecting rent on it.

Look-through rule for shares and trust interests

The ATO can “look through” your company or trust structure to check whether the underlying business assets qualify. A share in a company (or an interest in a trust) can be treated as an active asset if the underlying entity is itself carrying on a business with active assets making up at least 80% of its asset value.

This look-through rule lets family-business owners claim small business CGT concessions on the disposal of their shares in the family company, not just on the underlying business assets directly. Marco (Example 5 above) sells the goodwill out of his Pty Ltd, but he could equally sell his shares in the Pty Ltd and the look-through rule would let him access the same concessions — provided the company itself meets the 80% active-asset threshold.

The look-through rule continues post-reform unchanged. A family business operator who sells their 100% holding in their operating company on 1 February 2030 is in exactly the same position as they would have been on 30 June 2027. This matters for succession planning: many small business owners hold their business through a Pty Ltd structure, and the corporate wrapper doesn’t disqualify them from concessions when they exit.

Combining concessions — order matters

The standard ordering, applied to a small business taxpayer’s CGT event:

1. Current-year and carry-forward capital losses offset the gross gain first.
2. General 50% CGT discount — pre-reform; gone post-1 July 2027 for non-small-business taxpayers, but the small business concessions sit above it in the hierarchy.
3. 50% active asset reduction — halves the gain a second time.
4. Retirement exemption — up to $500,000 lifetime cap disregarded (with super contribution rules under age 55).
5. Rollover relief — defer any residual gain into a replacement active asset.

The 15-year exemption sits OUTSIDE this stack. When it applies, the entire gain is disregarded and steps 2–5 are not run — which is why Mei’s, Lisa’s and Bruce’s accountants run it first.

Post-reform, the absence of the general 50% discount in step 2 means the 50% active asset reduction kicks in earlier in the chain for small business owners — but the result of running step 3 onwards is unchanged. Most small business retirements get to $0 taxable anyway via the retirement exemption + super contribution path (Marco’s situation in Example 5).

Marco’s ordering recap: capital losses → (general 50% discount, N/A post-reform) → 50% active asset reduction → retirement exemption → $0. The order matters because each step is applied to whatever’s left after the previous one, not the original gain.

Planning point: locking in the 50% active asset reduction

The 50% active asset reduction is a separately legislated provision that survived a politically difficult Budget. Treasury could have folded it into the general reform — they didn’t.

For small business owners who would have qualified under the old regime, you still qualify. No new asset test. No new turnover threshold. No new age requirement. The general 50% discount that disappeared was already not the binding constraint for most small business exits — the active asset reduction, retirement exemption, and 15-year exemption all sit above it in the value hierarchy. If your business succession plan was built around the small business CGT concessions, the reform doesn’t disturb it.

What about sole traders who hold shares as investment?

This is exactly Jenny’s situation (Example 6). The critical distinction: the small business CGT concessions apply only to assets used IN the business or held BY the business entity.

A sole trader’s personal share portfolio — index funds, blue-chip shares, ETFs held in their own name — is investment activity, not business activity. Those shares fall under the general reform regime: cost base indexation, 30% minimum tax, split treatment for the pre- and post-1 July 2027 portion of any gain. Same applies to a sole trader’s personal rental property, holiday house, crypto holdings, and any other asset that doesn’t pass the active asset test.

If you run a business as a sole trader, the practical effect is two-track CGT planning: business assets follow the small business CGT concessions (unchanged), and personal investment assets follow the new reform regime.

Pre-1985 active assets

The master CGT reform article notes that Budget Paper No. 2 (p.21) extends the new regime to pre-1985 (pre-CGT) assets — but only on the post-1 July 2027 portion of the gain. For small business owners with pre-1985 active assets, the small business CGT concessions still apply on the post-1 July 2027 gain because the small-business carve-out short-circuits the reform entirely.

A primary producer who has continuously worked land in the family since before 20 September 1985, sells in 2030, and meets the small business eligibility conditions can still claim the 15-year exemption on the entire disposal — one of the cleanest outcomes in the Budget package. (Note: this is distinct from Bruce’s situation in Example 4. Bruce bought in 1992, so he’s a normal post-CGT seller — the 15-year exemption clears him anyway. But a third-generation farmer whose family has held the land since 1960 would also get $0 via the 15-year exemption, where without the small business carve-out they’d have been hit by the new regime on the post-2027 portion of the gain.)

Calculators

• Small Business CGT Concessions Calculator — runs the four concessions in order: 15-year exemption check, 50% active asset reduction, retirement exemption ($500k lifetime cap), and rollover deferral. Hero calc for this article.
• CGT Calculator — for non-business asset disposals; handles the post-1 July 2027 split treatment with cost base indexation and 30% minimum tax.
• CGT Harvest Calculator — ranks loss-harvest candidates against expected disposals, including pre- vs post-reform timing.

Sources

• Treasury Budget Paper No. 2, Tax Reform — Boosting Home Ownership (12 May 2026), p.21 (CGT reform measure and small business CGT carve-out).
• Treasury fact sheet: Negative Gearing and Capital Gains Tax Reform (12 May 2026) — small business carve-out section.
• Income Tax Assessment Act 1997, Division 152 (Small business relief).
• CGT Discount Reform: Cost Base Indexation + 30% Minimum Tax from 1 July 2027 — master article on the general reform.

Related reading

• CGT Discount Reform: Cost Base Indexation + 30% Minimum Tax from 1 July 2027 — the general reform that small business concessions sit beside.
• Backing Small Business — Budget 2026 IAWO, Loss Carry-Back and Start-Up Refundability — the wider small business Budget package.
• Budget 2026 Explained: Winners and Losers — full Budget breakdown.