If you have owned and run your business for 15 consecutive years, you may qualify for the most powerful capital gains tax concession in Australia — a complete exemption that means you could sell your business and pay zero CGT. Not a reduction. Not a partial relief. Zero.

The CGT 15-year exemption is the most valuable concession available under the small business CGT rules. Yet many business owners approaching retirement are unaware they qualify — or they inadvertently lose it through poor planning. This guide explains who qualifies, how the exemption works, and the key planning traps to avoid.

What Is the CGT 15-Year Exemption?

The CGT 15-year exemption is contained in Division 152-B of the Income Tax Assessment Act 1997 (ITAA 1997). It provides a complete exemption from capital gains tax on the sale of a qualifying business asset if you have continuously owned that asset for at least 15 years, and you meet the age and retirement conditions at the time of sale.

Unlike the other small business CGT concessions — which reduce or defer a capital gain — the 15-year exemption eliminates it entirely. If you qualify, the entire gain is disregarded for income tax purposes. You do not need to apply any other concession on top of it.

The Australian Taxation Office provides detailed guidance on the 15-year exemption on the ATO website.

Who Qualifies for the CGT 15-Year Exemption?

There are two sets of conditions you must satisfy: the basic conditions (shared by all small business CGT concessions) and the specific conditions unique to the 15-year exemption.

Basic Conditions

• Small business entity test: Your aggregated annual turnover must be less than $10 million, OR
• Net asset value test: The net value of your CGT assets (and those of associated entities) must be less than $6 million immediately before the CGT event.
• Active asset test: The asset being sold must be an “active asset” — that is, it must be used, or held ready for use, in carrying on a business.

Specific Conditions for the 15-Year Exemption

• 15 years of continuous ownership: You (or the entity) must have continuously owned the active asset for at least 15 years leading up to the CGT event.
• Age and retirement condition: At the time of the CGT event, you must be aged 55 or over AND be retiring, OR you must be permanently incapacitated (regardless of age).

For companies and trusts: Additional conditions apply. A “significant individual” — someone who held at least a 20% interest in the company or trust — must have had that interest for a total of at least 15 years. That individual must also satisfy the age and retirement (or permanent incapacity) condition at the time of the sale. This ensures the concession flows to the person who has genuinely built and owned the business over the long term.

What Counts as an “Active Asset”?

An active asset is one that you use, or hold ready for use, in the course of carrying on a business. Common examples include:

• Business goodwill
• Commercial real property used in your business operations
• Plant and equipment used in the business
• Shares in a company that carries on a business (subject to additional tests)
• Interests in a trust that carries on a business

What does not qualify: Residential property held as a passive investment does not meet the active asset definition, even if the rental income funds the business. Cash held in a bank account (above certain thresholds) and financial instruments held as investments are also excluded. If you are unsure whether a specific asset qualifies, seek professional advice before proceeding with a sale.

The 15-Year Continuous Ownership Test

The ownership must be continuous for at least 15 years. Brief periods where the asset was not actively used in the business — such as a short shutdown during a renovation — are generally not fatal to the exemption, provided the overall character of the asset as an active business asset is maintained. However, there are two critical risk areas:

Business Restructures Can Reset the Clock

This is the most common trap. If you restructure your business partway through the 15-year period — for example, if you operate as a sole trader for 10 years and then transfer the business assets into a company or trust — the new entity effectively starts its ownership clock from the date of the transfer. Your prior 10 years of individual ownership do not carry over to the new structure automatically.

This means a restructure at year 10 could push your qualifying date out another 15 years from the transfer. The ATO does provide small business restructure roll-over relief under Subdivision 328-G, but specific conditions apply and professional advice is essential before any restructure is undertaken.

Monitoring the 15-Year Anniversary

Many business owners do not track the date they first acquired their key business assets. Knowing your exact acquisition date matters — particularly if you are approaching the 15-year mark. Selling even a few months before the anniversary could cost you the entire exemption on what might be a million-dollar gain.

How the CGT 15-Year Exemption Works — Worked Example

To understand the real-world impact of this concession, consider the following example.

David’s situation: David has operated a plumbing business as a sole trader for 18 years. He is 61 years old and ready to retire. He sells the business goodwill and the commercial property from which he operated for a combined price of $1.6 million. His original cost base across both assets totals $400,000, giving him a total capital gain of $1.2 million.

Without the 15-Year Exemption

Under ordinary CGT rules, David would apply the 50% CGT discount available to individual taxpayers who have held assets for more than 12 months. This reduces his taxable gain to $600,000. Added to his other income, his marginal tax rate on a $600,000 gain could result in a tax bill of $270,000 or more, depending on his total assessable income for the year.

With the 15-Year Exemption

Because David has continuously owned the active business assets for 18 years, is aged 61, and is retiring, he qualifies for the 15-year exemption. The entire $1.2 million capital gain is disregarded. David pays zero CGT. Tax saved: $270,000 or more.

This is the power of the 15-year exemption. For business owners who have spent their careers building something, it can be the difference between a comfortable retirement and a substantial and unexpected tax liability.

What Happens to the Proceeds? The Super Contribution Opportunity

One of the most significant — and underutilised — aspects of the 15-year exemption is the ability to contribute the sale proceeds into superannuation under a special cap known as the CGT cap amount.

For the 2025–26 financial year, the CGT cap is $1.705 million. This is a lifetime cap that is entirely separate from your standard non-concessional contribution cap ($120,000 per year, or $360,000 under the bring-forward rule). Contributions made under the CGT cap do not count toward your annual non-concessional cap.

For business owners like David in the example above, this means that the $1.2 million gain — which is entirely tax-free under the 15-year exemption — can also be contributed directly into superannuation, where it will be sheltered from tax on future investment returns. Combined with the zero CGT on the sale, this is one of the most powerful wealth transfer mechanisms available to retiring business owners in Australia.

Important: The CGT cap contribution requires specific ATO forms (form NAT 71161) and must be structured correctly. Your superannuation fund must be notified before or when the contribution is made. Getting this wrong can result in the contribution being treated as a standard non-concessional contribution, which may trigger excess contribution penalties.

How the 15-Year Exemption Interacts With the Other CGT Concessions

The four small business CGT concessions apply in a specific order of priority:

1. The 15-year exemption
2. The 50% active asset reduction
3. The retirement exemption
4. The rollover concession

The 15-year exemption takes priority. If you qualify for it and your entire gain is exempt, you do not need — and cannot use — the other concessions on that same gain. The gain is simply gone.

If you do not qualify for the 15-year exemption (for example, if you have owned the business for only 12 years, or you are aged 52 and not permanently incapacitated), you may still be eligible for the other concessions. The CGT retirement exemption is particularly relevant for business owners who do not meet the 15-year threshold — it allows you to exempt up to $500,000 in lifetime capital gains, with proceeds contributed to super. Read our detailed guide on how the CGT retirement exemption works for business owners.

For a full overview of all four concessions and how they interact, see our guide to small business CGT concessions.

Planning Mistakes That Can Cost You the Exemption

In advising business owners on exits and retirement planning, the following mistakes come up repeatedly:

1. Not Monitoring the 15-Year Anniversary

If you are approaching your 15th anniversary of owning a key business asset, plan around it. Selling even a month before the anniversary date disqualifies you. A delay in settlement — even an unexpected one — could push the CGT event past the anniversary date in the wrong direction. Know your dates and build them into your exit timeline.

2. Restructuring Without Taking Advice First

A restructure from sole trader to company or trust can reset your ownership clock, potentially delaying your ability to access the exemption by 15 years. If you are within the 15-year window — say, in year 10 or 11 — always seek specialist tax advice before undertaking any structural change. The cost of advice is trivial compared to the potential tax exposure.

3. Not Seeking Advice Before Committing to a Sale

Many business owners first contact an accountant after signing a contract of sale. By then, the CGT event has been triggered and the options are limited. Tax structuring needs to happen before the sale, not after. If you are thinking about selling in the next one to three years, now is the time to get advice.

4. Confusing the CGT Cap With Standard Super Contributions

The CGT cap amount is a separate, special contribution type. If you inadvertently treat the proceeds as a regular non-concessional contribution, you may use up your annual cap and face excess contribution penalties. The paperwork must be completed correctly and in the right sequence.

5. Assuming the Exemption Is Automatic

The 15-year exemption is not applied automatically by the ATO. You must elect to apply it in your tax return and satisfy the conditions. Failing to elect — or failing to keep records that prove continuous ownership and active use — can result in the exemption being disallowed on audit.

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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