Small Business CGT Concessions: The Four Tax Breaks Explained

What the small business CGT concessions are🔗

The concessions live in Division 152 of the tax law and reward owners for building something over time. They sit on top of the general 50% CGT discount (which already halves a gain on assets held more than 12 months). Used correctly, they can reduce a taxable gain to nothing. New to how CGT works in the first place? Start with our guide to capital gains tax in Australia.

One distinction trips people up constantly: these concessions apply to the asset you sell, not the business as a whole.

Who qualifies: the basic conditions🔗

To access any concession you must satisfy at least one of two basic conditions, plus the active asset test.

• The $6 million net asset value test. Total assets minus liabilities across you, your affiliates and connected entities, under $6 million. It includes personal investment properties and shares. It excludes your main residence (to the extent it is not used for business) and super.
• The $2 million aggregated turnover test. Your turnover plus that of affiliates and connected entities, under $2 million. You only need to pass one of these two.
• The active asset test. The specific asset must have been used in the business for at least half the ownership period (7.5 years if you owned it more than 15). Business premises, plant, goodwill and IP can qualify. Passive assets like rentals or shares generally do not.

If your business runs through a company or trust, two extra terms matter: a significant individual holds at least a 20% stake, and a CGT concession stakeholder is that person or their spouse. The exempt money has to flow through to them.

The four concessions🔗

The 15-year exemption is the big one: the entire gain is disregarded, so you do not even bother with the discount. The 50% active asset reduction has no age or retirement condition and is the everyday workhorse: after the general 50% discount, it halves the gain again, so you are taxed on just 25% of the original. The retirement exemption exempts up to a $500,000 lifetime amount (under 55 means it goes to super). The rollover defers the gain into a replacement active asset you buy within two years.

How the concessions stack🔗

Apart from the 15-year exemption (which ends the story by wiping everything), the concessions combine in a set order: capital losses first, then the general 50% discount, then the 50% active asset reduction, then the retirement exemption, then the rollover.

Priya sells goodwill for a $600,000 gain. The general 50% discount takes it to $300,000. The 50% active asset reduction halves it again to $150,000. She then applies the retirement exemption to the remaining $150,000 (well under the $500,000 cap), leaving $0 taxable. Because she is under 55, that $150,000 goes straight into her super. Not a bad result for a $600,000 gain.

The super contribution angle🔗

The retirement exemption and the 15-year exemption both unlock a super contribution pathway that sits outside the normal caps. These are called CGT small business contributions, and they count against a separate, much larger CGT cap ($1,865,000 for 2025-26), not the standard $120,000 non-concessional cap.

The catch that costs people real money: you must notify your super fund on the correct form (ATO form NAT 71454) before or when you contribute. Use the wrong form, or none at all, and the ATO can treat it as a standard contribution and hit you with excess contributions tax. If you are near the $1.9 million transfer balance cap, get advice first. Salary sacrifice and contribution strategy are covered more in our salary sacrifice super guide.

Common mistakes🔗

• Assuming the business qualifies, not the asset. The active asset test applies to the specific thing you sell, not the business as a whole.
• Forgetting the retiring condition for the 15-year exemption. Being 55+ is necessary but not sufficient. You also have to be retiring or permanently incapacitated.
• Ignoring the $500,000 lifetime cap. The retirement exemption accumulates across every time you use it.
• Not notifying the super fund correctly. Use NAT 71454, or risk excess contributions tax.
• Missing the 2-year replacement deadline on the rollover. The deferred gain snaps back the moment the window closes.
• Thinking the net asset test only counts business assets. Personal rentals and shares count too.

If you run your business as a sole trader, our guide to sole trader tax and the article on capital gains tax on shares are useful companions.

Frequently asked questions🔗

Keep reading🔗

• Capital gains tax in Australia: how it actually works
• Capital gains tax on shares in Australia
• Sole trader tax in Australia
• The CGT 6-year rule for your former home