Small Business Capital Gains Tax (CGT) Concessions: Ultimate Guide for Australian Business Owners

Small business CGT concessions can potentially reduce or eliminate capital gains tax when selling business assets. Four main concessions are available: a 15-year exemption, a 50% active asset reduction, a retirement exemption, and rollover relief. Eligibility depends on factors like turnover, asset values, and specific conditions for each concession.

A Western Sydney business owner recently told me, "I wish I'd known about these concessions before selling my first business." That's exactly why I'm diving deep into this topic today - to help you understand the valuable tax concessions available when selling your business assets.

What Are Small Business CGT Concessions?

Small business CGT concessions are tax breaks designed to help owners reduce or eliminate capital gains tax when selling business assets. These concessions can be incredibly powerful - sometimes allowing you to reduce a capital gain to zero.

The Four Main CGT Concessions Explained

1. Small Business 15-Year Exemption

This is the golden ticket for CGT concessions. If you've owned an active business asset for 15 continuous years and are retiring (aged 55+) or permanently incapacitated, you can sell the asset completely CGT-free.

Example:

Sarah, 57, sells her Penrith graphic design studio for $800,000
Original purchase price: $200,000
Potential capital gain: $600,000
After 15-year exemption: $0 CGT payable

2. 50% Active Asset Reduction

This concession halves your capital gain on active business assets owned for at least 12 months. It's particularly valuable when combined with other concessions.

Example:

Capital gain: $100,000
After 50% active asset reduction: $50,000

3. Retirement Exemption

This provides a lifetime CGT exemption of up to $500,000. If you're under 55, you must pay the exempt amount into your super fund.

4. Small Business Rollover

Need more time? This concession lets you defer your capital gain for two years while you:

• Purchase a replacement business asset
• Make capital improvements to existing assets

Eligibility Requirements

To access these concessions, you must satisfy either:

1. Maximum net asset value test ($6.5 million)
   OR
2. Small business entity test ($2 million aggregated turnover)

Plus, the asset must pass the active asset test - meaning it was used in your business for:

• At least 7.5 years (for the 15-year exemption)
• Half the ownership period or 7.5 years, whichever is shorter (other concessions)

How to Combine CGT Concessions

The real power comes from combining concessions. Here's a practical example:

Original capital gain: $200,000
Step 1: Apply 50% general discount: $100,000
Step 2: Apply 50% active asset reduction: $50,000
Step 3: Apply retirement exemption: $0

Common Mistakes to Avoid

1. Not checking eligibility before the sale
2. Missing documentation requirements
3. Incorrect timing of elections
4. Failing to consider connected entities
5. Not seeking professional advice

Making the Most of Your CGT Concessions

To maximise these concessions:

1. Plan ahead - ideally years before selling
2. Keep detailed records
3. Consider timing carefully
4. Get professional advice specific to your situation
5. Review eligibility regularly as your business grows

Next Steps for Your Business

These concessions can save you significant money when selling business assets, but they're complex. Let's chat about your specific situation if you're considering selling business assets in the Penrith area or greater Sydney. Contact us at [email protected] to ensure you make the most of these valuable concessions.

Frequently Asked Questions: