If you’re planning to sell your business — or even just thinking about it — there’s a set of tax concessions that could save you hundreds of thousands of dollars in Capital Gains Tax. Most small business owners have never heard of them. The Australian Taxation Office calls them the small business CGT concessions, and when applied correctly, they can reduce a capital gain of $700,000 down to zero. Legally.

But here’s the catch: accessing these concessions requires planning. In some cases, you need to have owned the asset for 15 years. You need the right structure in place. And you need to understand the basic conditions before you’re anywhere near a sale — which is exactly why this guide exists.

Whether you’re selling in two years or ten, this is the most important tax planning topic you’ll encounter as a small business owner. At Pinnacle Accounting & Advisory, Mina Baselyous (CPA + CTA) works with Melbourne business owners to structure their affairs well before any sale — because the difference between good planning and no planning can be measured in hundreds of thousands of dollars.

What Are the CGT Small Business Concessions?

The CGT small business concessions are four powerful tax concessions contained in Division 152 of the Income Tax Assessment Act 1997. They exist specifically for small business operators and allow you to reduce — or completely eliminate — Capital Gains Tax when you sell a qualifying business asset.

These concessions are separate to the general 50% CGT discount available to individual taxpayers who hold an asset for 12 months or more. The small business concessions can be stacked on top of the general discount, which is where the real power lies. A gain that might otherwise trigger a massive tax bill can be reduced to nil through careful application of the right concessions in the right order.

The four concessions under Division 152 are:

• The 15-year exemption (Division 152-B)
• The 50% active asset reduction (Division 152-C)
• The retirement exemption (Division 152-D)
• The small business rollover (Division 152-E)

Before you can access any of them, you must first satisfy the basic conditions.

The Basic Conditions — Who Qualifies?

The ATO requires two layers of basic conditions to be satisfied before any CGT small business concession can be applied. Get these wrong and none of the four concessions are available. Get them right and you open the door to potentially life-changing tax savings.

Condition 1: The Entity Size Test

You must satisfy at least one of the following:

• Maximum net asset value (MNAV) test: The total net assets of your entity, plus the net assets of any connected entities and affiliates, must be $6 million or less at the time of the CGT event
• Small business entity test: Your entity’s aggregated annual turnover must be less than $10 million (from 1 July 2016 onwards)

The net asset value test catches many business owners by surprise. It’s not just the value of the business itself — it includes assets held by connected entities and affiliates. If you’ve built significant personal wealth over the years (investment properties, share portfolios, other business interests), these can count towards the $6 million threshold. Business owners with more than $10 million in aggregated turnover who also exceed $6 million in net assets will not qualify.

Always verify the current thresholds with the ATO’s small business CGT concessions page before proceeding, as these figures are subject to legislative change.

Condition 2: The Active Asset Test

The asset being sold must be an active asset — one that is used (or held ready for use) in the course of carrying on a business by you or a connected entity. For shares in a company or interests in a trust, at least 80% of the entity’s assets must be active assets at the time of sale.

The asset must also have been active for at least half of the total ownership period. For assets owned for more than 15 years, the requirement is that it was active for at least 7.5 years.

Passive investment assets generally don’t qualify — vacant land held purely for capital growth, for example, or financial instruments in a listed company. The type of entity through which you hold your business assets significantly affects whether you satisfy these conditions. This is why choosing the right business structure from the outset is so important for long-term tax planning.

The Four CGT Small Business Concessions Explained

1. The 15-Year Exemption (Division 152-B) — The Best Concession Available

This is the most powerful of all the small business CGT concessions. Under the 15-year exemption, the entire capital gain is tax-free — it doesn’t enter your assessable income at all. But three conditions must all be met:

• You’ve continuously owned the business asset for at least 15 years
• You’re aged 55 or over at the time of the CGT event
• You’re retiring or are permanently incapacitated

The retirement requirement is less restrictive than it sounds. It doesn’t mean formal retirement from all employment — it means retiring from a substantial involvement in the relevant business. If you’re selling the business and stepping back from an active role, you’ll typically satisfy this condition.

For shares in a company or interests in a trust, the entity must have satisfied either the small business entity test or the maximum net asset value test for periods totalling at least 15 years during your ownership period.

If you qualify for the 15-year exemption, you don’t need to apply any other concession. The entire gain — regardless of its size — is completely exempt. This is why long-term planning matters so much: if you’re 48 today and have owned your business for 10 years, you could be five years away from a completely tax-free exit. For how these concessions fit into a full exit, see our guide to selling your business in Australia.

Under 55? This exemption is unavailable to you. Consider the CGT retirement exemption instead.

2. The 50% Active Asset Reduction (Division 152-C)

The most flexible of the four concessions — no age requirement, no retirement condition, no long minimum ownership period. If the CGT event happens to an active asset and you satisfy the basic conditions, you can reduce your capital gain by 50%.

For individual taxpayers, this concession is typically applied after the general 50% CGT discount (for assets held 12 months or more). The combined effect is significant:

• $500,000 capital gain
• Less 50% general CGT discount = $250,000
• Less 50% active asset reduction = $125,000 taxable gain

That’s a 75% reduction in the taxable gain before applying any other concession. For individual business owners, the combination of the CGT discount and active asset reduction is the standard starting point for CGT planning on a business sale.

An important note for companies and trusts: The general 50% CGT discount is not available to companies. Trusts must distribute capital gains to individual beneficiaries to access it. However, the 50% active asset reduction still applies at the entity level — making it valuable even for corporate structures, albeit with a different base calculation.

3. The Retirement Exemption (Division 152-D)

The retirement exemption allows you to exclude up to $500,000 of capital gain from your assessable income over your lifetime. There’s no minimum age to apply this concession — but the rules differ depending on your age at the time:

• Under 55: The exempt amount must be contributed to a complying superannuation fund or retirement savings account at the time you make the choice
• 55 or over: No requirement to contribute to super — you can keep the exempt amount

The $500,000 limit is a lifetime limit. If you’ve used $200,000 of the retirement exemption on a previous business asset sale, only $300,000 remains available for future sales. Keep records of every election you make.

This concession is typically applied after the 50% active asset reduction, meaning the $500,000 exemption applies to an already-reduced gain. The practical effect is that a $500,000 original capital gain can often be reduced to zero after applying the general discount, the active asset reduction, and then the retirement exemption.

For business owners operating through a company or trust structure, the retirement exemption has additional complexity. Specific rules govern which individuals can access the exemption when the sale occurs at the entity level — another reason why the structure of your business matters when planning an exit.

For a full breakdown — including worked examples for under-55 and over-55 owners, the 30-day super contribution rule, and the CGT cap amount explained — see our detailed guide to the CGT retirement exemption.

4. The Small Business Rollover (Division 152-E)

The rollover concession works differently to the other three — it doesn’t eliminate CGT, it defers it. When you sell a qualifying business asset and use the proceeds to acquire a replacement active asset, you can roll the capital gain forward into the cost base of the new asset. The gain is only triggered when the replacement asset is eventually sold.

To qualify, you must acquire the replacement asset within one year before or two years after the CGT event. The gain deferred must be used to acquire a qualifying replacement asset — not simply held as cash.

The rollover is most useful when you’re selling one business and immediately reinvesting in another. It’s the least commonly used of the four concessions — but when reinvestment is the plan, it can provide valuable tax deferral during the transition period.

Watch: CGT Small Business Concessions Explained

Prefer to watch instead of read? In this BusiHealth video, Mina walks through how Australian small business owners can legally reduce or eliminate Capital Gains Tax using the small business concessions:

How to Stack the Concessions — A Worked Example

Let’s walk through a realistic scenario to see how these concessions work together in practice. This is a hypothetical example for illustration purposes — your individual circumstances will differ.

Scenario: Michael is 58 years old and sells his business for $800,000. His cost base is $100,000. He’s owned the business for 12 years (so the 15-year exemption isn’t available). The asset qualifies as an active asset. Michael satisfies the small business entity test via turnover.

• Capital gain: $800,000 − $100,000 = $700,000
• Step 1 — General 50% CGT discount (asset held 12+ months): $700,000 × 50% = $350,000
• Step 2 — 50% active asset reduction: $350,000 × 50% = $175,000
• Step 3 — Retirement exemption (Michael is 58, no super contribution required): Apply $175,000 of the $500,000 lifetime limit = $0 taxable gain

Result: Zero tax on a $700,000 capital gain — legally. Michael used three of the four concessions, leaving $325,000 of his lifetime retirement exemption available for any future business asset sales. Because he’s over 55, he keeps the proceeds without any requirement to contribute to superannuation.

This outcome isn’t exceptional — it’s achievable for many qualifying small business owners. The difference is knowing the concessions exist, understanding the conditions, and having the right structure in place before the sale occurs.

Planning Is Everything — Don’t Wait Until You’re Ready to Sell

This is where most business owners get it wrong. They come to an accountant six months before a sale and ask whether they can access the CGT concessions. Sometimes the answer is yes. But frequently, decisions made years earlier — about business structure, asset ownership, or personal wealth accumulation — have reduced their options or locked them out of the best outcomes entirely.

The 15-Year Clock Starts on Day One

By definition, you can’t access the 15-year exemption at the last minute. If you’ve been in business for 13 years, you’re two years away from a potentially completely tax-free exit — but only if you’re still operating and can satisfy the retirement condition when you sell. Knowing this changes the timing of your exit decision entirely. A two-year difference in sale timing could mean the difference between paying significant CGT and paying none at all.

The Net Asset Value Test Is Assessed at Sale

Business owners who have been highly successful and built significant personal wealth — investment properties, share portfolios, other business interests — sometimes discover they fail the $6 million net asset value test at the time of sale. This can remove one pathway to the basic conditions entirely.

Proactive strategies — such as maximising superannuation contributions over time (super balances are generally excluded from the MNAV test) or restructuring personal asset holdings — can help manage this before it becomes a problem. This is a tax planning conversation, not a last-minute one.

Structure Determines Access

Who owns the business asset — and through which entity — affects which concessions are available and how they operate. Individual business owners, shareholders in a company, and partners in a partnership all face different rules. Company shareholders selling shares can potentially access the 50% CGT discount personally, even though the company itself cannot. Trust distributions of capital gains to individual beneficiaries may unlock concessions that aren’t available at the trust level.

Getting the structure right from the beginning — or restructuring well before a sale — is one of the most valuable things a tax adviser can do for a business owner planning an exit. The ATO has specific rules about lead times for certain restructures, which means acting early is essential. The small business restructure rollover can allow eligible small businesses to change structure without triggering CGT at the time of transfer — a valuable option when you need to restructure your affairs before a planned sale.

Frequently Asked Questions

What is the maximum net asset value for CGT small business concessions?

The maximum net asset value threshold is currently $6 million. This includes the net assets of the entity disposing of the asset, plus the net assets of any connected entities and affiliates. The test is applied at the time of the CGT event — not at the start of the income year. Always confirm the current threshold on the ATO website, as thresholds can change.

Can I use the CGT concessions if I sell shares in my company?

Yes — shares in a company (or interests in a trust) can qualify as active assets, provided the active asset test is satisfied. Broadly, at least 80% of the company’s assets must be active assets. Individual shareholders can then access the concessions when they sell their shares, even though the company itself isn’t the one disposing of a business asset. The structure of the sale — selling shares versus selling business assets — has significant CGT implications, so get advice before proceeding.

Do I need to be an Australian resident to access the small business CGT concessions?

Generally yes — Australian tax residency is required. Non-residents are subject to CGT only on taxable Australian property (such as direct real property interests), and the small business CGT concessions are generally only available to Australian residents at the time of the CGT event. If your residency status has changed recently, seek specific advice before assuming you qualify.

Can a company access the 50% CGT discount?

No. The general 50% CGT discount is not available to companies. It applies to individuals and (in some circumstances) trusts that distribute capital gains to individual beneficiaries. However, a company can access the 50% active asset reduction if it satisfies the basic conditions — the reduction applies to the company’s capital gain, which then affects the amount distributed to shareholders. Individual shareholders who then sell their shares may access the 50% discount personally. This layered analysis is why professional advice is essential.

What if I only qualify for some of the concessions?

You can apply whichever concessions you qualify for, individually and in combination. There’s no requirement to use all four. Many business owners use the 50% active asset reduction and the retirement exemption together and achieve very low or zero CGT without ever needing the 15-year exemption or the rollover. Others use the 15-year exemption alone and eliminate the entire gain. The key is knowing what’s available to you well before the sale occurs.

How long before I sell should I start planning?

Ideally, years — not months. If the 15-year exemption is a goal, you’re already counting down the clock. If you need to manage the net asset value test, personal wealth strategies may need to be in place years before a sale. And if a business restructure is warranted, the ATO has specific rules about minimum holding periods after certain transactions. The practical answer: engage a tax adviser as soon as a future sale is on your horizon, even if it’s five or ten years away. The earlier you start, the more options you have.

General Advice Warning: The information provided in this article is general in nature and does not constitute personal financial, tax or legal advice. It has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your own circumstances. Pinnacle Accounting & Advisory is not a licensed financial adviser. For advice tailored to your situation, please contact us directly.

The CGT small business concessions are among the most powerful — and most underutilised — tax tools available to Australian business owners. A business sale is often a once-in-a-generation wealth event. The difference between arriving at that sale well-prepared and arriving unprepared can be measured in hundreds of thousands of dollars. If you’re considering selling your business in the next five to ten years, the best time to start planning is now. Contact Pinnacle Accounting & Advisory to book a consultation with Mina and find out exactly where you stand.

Frequently Asked Questions

This article contains general advice only and does not take into account your specific circumstances. Please speak with a qualified accountant or tax adviser before making financial decisions.

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