Australia’s small business CGT concessions under Division 152 can reduce or eliminate capital gains tax on the sale of an active business asset. Access depends on satisfying eligibility conditions tested at the time of the sale, which is why planning years ahead matters.
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Small Business CGT Concessions: A Practical Guide
The small business CGT concessions under Division 152 are the most valuable tax relief available to business owners, and access to them is decided years before a sale rather than at settlement. Eligibility is tested against conditions that depend on how the business has been structured and held.Â
Understanding the small business CGT concessions in Australia means navigating eligibility conditions, four distinct concessions with different rules, and planning that should begin years before any disposal occurs.
Key Takeaways
Who Is Eligible for Small Business CGT Concessions?
To access the small business CGT concessions, the business must satisfy one of two basic conditions. The first is the maximum net asset value (MNAV) test: the taxpayer’s net assets, together with the net assets of any entity connected with or affiliated with the taxpayer, must not exceed $6 million. The second is the small business entity (SBE) test: the taxpayer must be a small business entity with aggregated turnover below $2 million.
In addition to the basic conditions, the asset being disposed of must be an active asset. An active asset is an asset used, or held ready for use, in the course of carrying on a business. It includes goodwill, trade equipment, and real property used in the business. It excludes most financial assets, investments, and real property held as a passive investment.
For certain concessions, an additional requirement applies: a significant individual must hold 20 per cent or more of the entity, or a CGT concession stakeholder must exist. These requirements are designed to ensure the concessions benefit owners with genuine equity in the business.
The Four Concessions
1. 15-Year Exemption
The 15-year exemption is the most generous of the four concessions. Where an individual or a company that is a small business entity has held an active asset for at least 15 years, and a significant individual aged 55 or over is retiring or permanently incapacitated, the capital gain on disposal is fully exempt. The gain does not even need to be reduced by the 50 per cent general discount, it is simply exempt. For business owners who have held their business for 15 or more years and are approaching retirement, this concession can eliminate CGT entirely.
2. Retirement Exemption
The retirement exemption exempts up to a lifetime limit of $500,000 in capital gains from CGT. The individual does not need to be retiring to use the exemption. The name is somewhat misleading. Where the taxpayer is under 55, the exempt amount must be contributed to a complying superannuation fund. Where the taxpayer is 55 or over, the exempt amount can be received free of CGT without being contributed to super.
3. 50% Active Asset Reduction
The 50 per cent active asset reduction halves the capital gain attributable to an active asset before applying any other discount. Where the individual’s 50 per cent general discount also applies, the combined effect is a reduction of 75 per cent of the original capital gain. This concession is the most broadly accessible. It does not require a 15-year holding period or retirement.
4. Small Business Rollover
The small business rollover allows a business to defer a capital gain on the disposal of an active asset where a replacement active asset is acquired within a two-year period. The deferred gain reduces the cost base of the replacement asset. The rollover is used where the business owner intends to reinvest the proceeds in another business asset but does not want to crystallise the CGT in the current year.
Why the Horizon Matters
The 15-year exemption requires a 15-year holding period. The active asset test requires the asset to have been used in a business for at least half of the period it was held. These are not conditions that can be satisfied at the time of sale. They must be managed over the asset’s holding life.
Business owners who are considering succession, sale, or transfer in the medium term should review their eligibility for the small business CGT concessions as part of their succession planning, not as an afterthought in the year of disposal. Changes to the structure of the business (for example, incorporating a sole trader business, or transferring assets between entities) can affect eligibility and should be reviewed against the active asset and significant individual requirements.
Small business CGT concessions: why the planning horizon decides it
DBA Advisory tests eligibility well ahead of a sale, when the structure and the holdings can still be adjusted.
Eligibility is tested at the time of the CGT event, and the things that determine it are often set years earlier: who owns the asset, whether it has been actively used in the business, and what else sits in the entity. An owner who first raises the concessions during a sale negotiation has already lost most of the ability to influence whether they apply.
Four concessions sit in the regime: the 15-year exemption, the retirement exemption, the 50 per cent active asset reduction and the small business rollover. They can interact, and the order in which they are applied changes the result. Establish eligibility first, then work out the combination.Â
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Frequently Asked Questions (FAQs)
The small business CGT concessions in Division 152 of the ITAA 1997 provide eligible small business owners with relief from capital gains tax on the disposal of active business assets. There are four concessions: the 15-year exemption (full CGT exemption for assets held for 15 or more years on retirement), the retirement exemption (up to $500,000 lifetime CGT exemption), the 50 per cent active asset reduction (halving of the capital gain), and the small business rollover (deferral of the gain where a replacement asset is acquired).
The maximum net asset value (MNAV) test requires that the net assets of the taxpayer and any connected or affiliated entities not exceed $6 million at the time of the CGT event. Net assets are calculated as the market value of assets less liabilities. Certain assets (including the family home, superannuation, and assets used for personal purposes) are excluded from the MNAV calculation. If the MNAV test is not satisfied, the SBE test ($2 million aggregated turnover) provides an alternative pathway.
Yes, for individuals and trusts. An individual who has held an asset for more than 12 months is entitled to a 50 per cent general CGT discount on the capital gain. The 50 per cent active asset reduction then applies to the reduced gain. The combined effect of the general discount and the active asset reduction reduces the net capital gain to 25 per cent of the original gain. The general discount does not apply to companies.
Where the taxpayer is under 55 at the time of the CGT event, the amount exempt under the retirement exemption must be contributed to a complying superannuation fund as a non-concessional contribution within 30 days of the CGT event or the receipt of the capital proceeds, whichever is later. Where the taxpayer is 55 or over, the exempt amount may be retained personally without contributing to superannuation.
How DBA Advisory Supports You
DBA Advisory is a Sydney-based operational advisory firm specialising in audit and assurance, tax and financial governance, SMSF administration, and outsourced back-office services for Australian businesses and professional services firms.
We help Australian businesses and professional services firms turn compliance obligations into systems that run reliably, with senior review at every step and fixed-fee certainty.
DBA Advisory offers fixed-fee Business sale and succession tax planning, CGT concession assessment, and SMSF advisory engagements with no hidden costs. Contact our team at dbaadvisory.com to discuss your requirements. General information only, not legal, tax, or compliance advice. Verify all obligations against current AUSTRAC, ATO, and legislative guidance.
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Disclaimer
© DBA Advisory 2026. This article is intended as general information only and does not constitute legal or compliance advice. Businesses should seek qualified advice specific to their circumstances and confirm all regulatory references against current guidance before acting on any information contained in this article.
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