Small Business CGT Advice
Division 152 Concessions, Eligibility Assessments, Active Asset Testing & Transaction Structuring
Service at a Glance
Personalized scope & lodgementSale of businesses, goodwill, commercial property, shares & trust interests
$2M aggregated turnover test or $6M maximum net asset value test (MNAVT)
15-year exemption, 50% active asset reduction, retirement & rollover
Business usage duration & excluding assets mainly used to derive passive rent
100% online video conference, phone or in-person consultation
- Pre-lodgement draft walkthrough & written client sign-off
- Extended ATO tax agent lodgement deadlines available
- Transparent upfront quoting & zero lodgement without approval
What are the small business CGT concessions?
The small business CGT concessions are a set of concessions in the tax law that may reduce, defer or disregard an eligible capital gain. They are separate from the ordinary CGT rules and are not automatically available just because the seller considers the business to be small.
15-Year Exemption
Can disregard an entire eligible capital gain where the asset has been continuously owned for at least 15 years and retirement or incapacity conditions are satisfied.
50% Active Asset Reduction
Reduces an eligible capital gain by 50%. This is distinct from the general 50% CGT discount and is available to companies that qualify.
Retirement Exemption
Can disregard eligible capital gains up to a statutory lifetime limit ($500,000), with superannuation payment requirements if under 55.
Small Business Rollover
Can defer all or part of an eligible capital gain for two years or longer when acquiring a replacement active asset or improving existing assets.
Who may qualify?
Eligibility starts with the basic conditions. Depending on the circumstances, access may involve satisfying the small business entity pathway based on aggregated turnover or the maximum net asset value test, as well as the active asset test. Current law generally uses a $2 million aggregated-turnover threshold for the relevant small business CGT test and a $6 million maximum net asset value threshold, but the calculations include specific rules for connected entities and affiliates.
$2 Million Aggregated Turnover Pathway
Satisfying the small business entity pathway where the entity carries on a business and its aggregated turnover (including connected entities and affiliates) is under $2 million.
$6 Million Maximum Net Asset Value Test
Satisfying the maximum net asset value test where total net market value of CGT assets owned by the entity, affiliates, and connected entities does not exceed $6 million immediately before the CGT event.
Connected Entities & Affiliates Rules
Specific tax aggregation rules require combining the turnover and net assets of entities you control (40%+ test) or affiliates that act in accordance with your directions.
Shares & Trust Interests (Stakeholders)
Additional conditions apply where selling shares or units, requiring significant individuals (20%+ small business participation percentage) and CGT concession stakeholders.
Ownership Chain and Related Entity Assessment
Additional conditions can apply where the CGT asset is a share or trust interest, or where the concession is being claimed by a company or trust. A small business CGT advice accountant should therefore review the ownership chain and related entities rather than looking only at the selling entity.
The active asset test
The active asset test examines whether the asset was used, or held ready for use, in the course of carrying on a business for the required period. Certain intangible assets, such as goodwill, may also qualify where the conditions are met.
Business Usage Duration
The asset must be used or held ready for use in the course of carrying on a business by you, an affiliate, or connected entity for at least half the ownership period (or 7.5 years if owned over 15 years).
Intangible Assets & Goodwill
Certain intangible assets, such as goodwill, licenses, patents, or intellectual property inherently connected to the commercial operations of the business, may also qualify where the conditions are met.
Rental & Commercial Property Rules
Assets mainly used to derive rent can be excluded from active-asset treatment, subject to the detailed rules and facts. Property transactions in particular need careful review because the business-use history and relationship between the property owner and operating entity can be important.
Careful Scrutiny for Commercial Real Estate
Assets mainly used to derive rent can be excluded from active-asset treatment, subject to the detailed rules and facts. Property transactions in particular need careful review because the business-use history and relationship between the property owner and operating entity can be important.
How the four concessions differ
Each concession provides a distinct tax mechanism to disregard, reduce, or defer capital gains arising from eligible business assets.
15-year exemption
This concession can disregard an eligible capital gain where the asset has been continuously owned for at least 15 years and additional requirements are met. For an individual, this includes conditions connected with retirement at age 55 or over, or permanent incapacity. Companies and trusts have further stakeholder requirements.
50% active asset reduction
Where the conditions are satisfied, this concession can reduce an eligible capital gain by 50%. It is distinct from the general CGT discount, and companies are not entitled to the general CGT discount.
Retirement exemption
The retirement exemption can disregard eligible capital gains up to a lifetime limit under the legislation. Additional payment and superannuation requirements can apply, including where the relevant individual is under 55.
Small business rollover
The rollover can defer all or part of an eligible capital gain. Later CGT consequences can arise depending on what happens with replacement assets or other rollover conditions.
General CGT Concepts vs Small Business Concessions
For general CGT concepts such as cost base, capital proceeds and capital losses, see our Capital Gains Tax page. This page is specifically about the small business concessions.
Common situations where advice is useful
Business sales, property disposals, and ownership transfers present critical tax considerations that benefit from early evaluation.
Selling a business or business goodwill
Disposals of complete operating enterprises, client books, brand names, or goodwill balances where substantial capital gains arise.
Selling commercial property used in a business
Disposing of business premises, warehouses, or land used directly in trading operations or held through related entities.
Selling shares in a private company or interests in a trust
Equity sales where small business participation percentages and concession stakeholder tests must be satisfied.
Restructuring ownership before a future sale
Strategic restructuring of business assets, subsidiaries, or trust arrangements well in advance of a market disposal.
Retirement or succession transactions
Transferring operations to the next generation or exiting the business upon reaching age 55 or permanent retirement.
A sale involving connected entities or family groups
Transactions within complex family group structures where cross-entity control and affiliate rules impact turnover and assets.
Uncertainty about aggregated turnover or maximum net asset value
Evaluating borderline balances near the $2M turnover or $6M net asset thresholds before finalizing sale agreements.
A transaction where several CGT concessions may interact
Modelling the sequence of applying general 50% discount, 50% active asset reduction, retirement exemption, and rollover.
Records we may request
To assess eligibility for the small business CGT concessions and calculate tax outcomes, we may request the following records:
Purchase and sale contracts
Original acquisition contracts, options, Heads of Agreement, and executed sale agreements establishing CGT event dates.
Asset acquisition dates and cost-base records
Invoices, legal settlement statements, capital improvements, stamp duty receipts, and records supporting elements of the cost base.
Business financial statements and tax returns
Historical balance sheets, profit and loss statements, and tax returns for the business over the relevant period.
Turnover information for connected entities and affiliates
Financial records and revenue reports for all related Australian and foreign trading entities to assess the $2M turnover test.
Balance sheets and market-value information relevant to the net asset test
Asset values and liabilities for the taxpayer, connected entities, and affiliates immediately before the sale for the $6M MNAVT.
Evidence of how and when the asset was used in the business
Operational records, leases, commercial agreements, and trading accounts substantiating active asset usage duration.
Company, trust and ownership records
Share registers, trust deeds, minutes, and constituent documents showing shareholdings, unit holdings, and stakeholder percentages.
Valuations or transaction documents where relevant
Formal market valuations, apportionment schedules for business assets, and independent appraisal reports.
How Financially Up can help
Our small business CGT work can include calculating the underlying capital gain, reviewing the basic conditions, analyzing connected entities and affiliates, checking active-asset history, considering the additional conditions for the relevant concession and preparing supporting tax calculations.
Underlying Capital Gain Calculation
Calculating the underlying capital gain, cost base elements, indexation or discount, and net proceeds from the disposal.
Basic Conditions & Aggregation
Reviewing the basic conditions, analyzing connected entities and affiliates, and testing the $2M turnover or $6M net asset thresholds.
Active Asset Verification
Checking active-asset history, business usage periods, and commercial property relationships to verify eligibility.
Concession Modelling & Tax Returns
Considering additional conditions for the relevant concession and preparing supporting calculations and tax-return disclosures.
Where the gain forms part of a company return or broader business transaction, the work can be coordinated with our Company Tax Returns or Business Tax & Accounting services.
Scope of Transaction-Specific Planning
Transaction-specific tax planning or restructuring advice is separately scoped and should be obtained early. Some transactions may also require legal, valuation, superannuation or other specialist advice outside the normal tax-return engagement.
Why choose Financially Up?
Financially Up Pty Ltd is a registered tax agent with 10+ years of experience. Our professional team includes CPA and IPA members and provides tax, accounting, bookkeeping and business advisory support Australia-wide, with online and in-person appointments available.
Frequently asked questions
Key questions regarding Australian small business CGT concessions, active assets, company discounts, and transaction timing.
Identifying eligible deductions is crucial for minimizing your taxable income and maximizing your tax savings. Our team at Financially Upwill diligently explore all potential deductions applicable to your situation. From commonly claimed deductions to often overlooked ones, we leave no stone unturned in helping you claim every deduction you're entitled to.