If you're selling a business, commercial property, or significant business assets, the CGT small business concessions are the most valuable tax breaks available to Australian SMEs. Used correctly, they can reduce a capital gain of $500,000+ to zero tax. Used incorrectly — or missed entirely — they cost business owners a fortune.
1. Basic Eligibility
To access any of the four concessions, you must first satisfy the basic conditions:
- $6 million net asset value test — total net assets of you, your affiliates, and connected entities must be under $6M. OR
- $2 million aggregated turnover test — your combined business turnover is under $2M.
- The asset must be an "active asset" — used in, or inherently connected to, your business for at least half the ownership period (or 7.5 years if owned longer than 15 years).
2. The Four Concessions
| Concession | Effect | Key Condition |
|---|---|---|
| 15-Year Exemption | Entire gain is tax-free | Owned for 15+ years, over 55 and retiring |
| 50% Active Asset Reduction | Halves the capital gain | Automatic if basic conditions met |
| Retirement Exemption | Up to $500k exempt per person | Must contribute to super if under 55 |
| Rollover | Defers the gain for 2 years | Must acquire a replacement active asset |
These concessions can be stacked. For example, a $600,000 gain can be reduced by the 50% general CGT discount (individual), then the 50% active asset reduction, then the retirement exemption — resulting in zero tax.
3. Worked Example
Sarah sells her physiotherapy practice for a $400,000 capital gain. She's 52 and has owned the business for 8 years.
- 50% general CGT discount: $400,000 × 50% = $200,000 remaining.
- 50% active asset reduction: $200,000 × 50% = $100,000 remaining.
- Retirement exemption: $100,000 is well under the $500k cap. She contributes $100,000 to super (required as she's under 55). Tax payable: $0.
Without the concessions, Sarah would have paid approximately $130,000+ in tax on the $400,000 gain.
4. Common Mistakes
- Not planning before the sale — concession eligibility must be assessed before contracts are signed. Restructuring afterwards is too late.
- Exceeding the $6M net asset threshold — including your home's value in the calculation when it shouldn't be (primary residence is excluded).
- Forgetting affiliates and connected entities — your spouse's business assets may count toward the $6M threshold.
- Not contributing to super when required under the retirement exemption for taxpayers under 55.
- Missing the 2-year rollover deadline — if you choose to defer, you must acquire a replacement asset within 2 years or the gain crystallises.
5. Start Planning Early
Ideally, start CGT planning 2–3 years before a sale. This gives you time to:
- Restructure assets to stay under the $6M threshold.
- Ensure the active asset test is satisfied.
- Separate non-business assets from the company.
- Maximise super contribution room for the retirement exemption.
Key Takeaways
- The four CGT concessions can reduce a business sale gain to zero tax.
- You must meet the $6M net asset test OR $2M turnover test.
- Concessions can be stacked for maximum benefit.
- Start planning 2–3 years before the sale — don't wait until settlement day.
- Under-55s must contribute the exempt amount to super under the retirement exemption.