Small Business CGT Concessions

About this programme

The small business CGT concessions are a set of four capital gains tax concessions the Australian Taxation Office (ATO) makes available to eligible small businesses that dispose of an active business asset — most commonly when an owner sells the business itself, or a business premises, plant, or a share/trust interest in the business entity. They are not a grant or a cash payment: they reduce, disregard, or defer the capital gains tax otherwise payable on the sale, and they are claimed through the normal income tax return rather than through a separate application process.

The four concessions are the 15-year exemption, the 50% active asset reduction, the retirement exemption, and the small business rollover. They can be used in combination — after applying the 50% active asset reduction to a gain, the remaining amount can often still go through the retirement exemption and/or the rollover, in that order.

Access depends first on meeting a set of 'basic conditions' common to all four concessions, and then on satisfying the specific extra conditions of whichever individual concession is being claimed. The basic conditions test the size of the business (via a turnover test or a net asset value test) and whether the asset being sold was genuinely used in the business (the active asset test).

The concessions sit within Australia's normal CGT regime administered by the ATO and are available to sole traders, partnerships, companies and trusts that meet the conditions — they are not restricted to a particular sector, and there is no funding round, allocation cap, or closing date, since they operate as standing tax law rather than a competitive program.

How it works

The small business 50% active asset reduction reduces the capital gain on an active asset by a further 50%, on top of the general 50% CGT discount already available to individuals and trusts that have held the asset for more than 12 months. It applies automatically once the basic conditions are met, unless the taxpayer specifically chooses for it not to apply (a company or trust might opt out, for example, to make larger tax-free payments under the retirement exemption instead).

The small business retirement exemption lets an eligible individual or CGT concession stakeholder disregard capital gains on an active asset up to a lifetime limit of $500,000. If the individual claiming it is under 55, the exempted amount must be paid into a complying superannuation fund; if 55 or over, it can be taken as cash with no requirement to contribute it to super. Amounts claimed under the retirement exemption (together with the 15-year exemption) also count toward a separate, annually indexed CGT cap that limits how much can be excluded from the non-concessional contributions cap when paid into super.

The small business 15-year exemption lets a taxpayer disregard the entire capital gain on an asset that has been continuously owned for the 15 years ending just before the CGT event, provided the individual is 55 or over and retiring, or permanently incapacitated, at the time of the sale (or the equivalent significant-individual condition is met for a company or trust making a payment to such an individual). Where the 15-year exemption applies, the other three concessions are not needed on that gain.

The small business rollover lets a taxpayer defer some or all of a capital gain. The replacement asset period runs from one year before to two years after the CGT event (longer if a look-through earnout right is involved). If a replacement active asset is acquired, or an existing active asset is improved, within that period, the deferral continues until the replacement asset is later disposed of or stops being used in the business; if no replacement asset is acquired by the end of the replacement asset period, the deferred gain becomes assessable at that point.

The concessions are claimed through the normal tax return: sole traders and partners report the concession in the CGT section of the individual tax return; companies and trusts report it in the CGT schedule. Any election required for a particular concession (for example, choosing the retirement exemption, or choosing not to apply the 50% active asset reduction) must be made no later than the day the relevant income tax return is lodged, and lodging the return is generally treated as sufficient evidence the choice was made.

Who can apply

To access any of the four concessions, the basic conditions must be met first. A CGT event must happen to an active asset (an asset used, or held ready for use, in the course of carrying on a business, or certain intangible assets connected with a business), and the gain that would otherwise arise must be a genuine capital gain (i.e. not already reduced to nil by another provision).

The taxpayer must also satisfy one of: being a 'CGT small business entity' for the income year (broadly, an entity carrying on a business with aggregated turnover under $2 million); satisfying the maximum net asset value test; being a partner in a partnership that is a CGT small business entity; or, for a passively-held asset used in a connected or affiliated entity's business, meeting the relevant small business entity or turnover test through that other entity.

The maximum net asset value test is satisfied if the total net value of CGT assets owned by the taxpayer, entities connected with the taxpayer, affiliates, and entities connected with those affiliates does not exceed $6 million, measured just before the CGT event. This $6 million threshold is not indexed for inflation.

The asset must pass the active asset test: it must have been an active asset of the taxpayer for at least half of the ownership period, or for at least 7.5 years if owned for more than 15 years.

If the CGT asset is a share in a company or an interest in a trust, extra conditions apply: the company or trust must itself satisfy the CGT small business entity/net asset value test, and CGT concession stakeholders with a combined small business participation percentage of at least 90% must hold that stake, or the company/trust must pass the significant individual test. An individual is a significant individual in a company or trust if they hold a small business participation percentage — directly or indirectly through interposed entities — of at least 20%.

Each specific concession then carries its own additional condition: the 15-year exemption requires the relevant individual to be 55 or over and retiring, or permanently incapacitated, at the time of the CGT event (or the equivalent condition where the asset is held by a company or trust making a payment to such a person); the retirement exemption requires an eligible individual (or CGT concession stakeholder) and, if under 55, requires the exempted amount to be paid into superannuation; the rollover requires acquisition or improvement of a replacement active asset within the replacement asset period if the deferral is to continue beyond two years.

How to apply

1. There is no separate application form or portal — the concessions are self-assessed and claimed as part of preparing the income tax return for the year in which the CGT event (typically the sale of the business asset) occurred.
2. Work out whether the basic conditions are met for the specific asset and CGT event: confirm the asset is an active asset, and confirm the business passes either the CGT small business entity turnover test (aggregated turnover under $2 million) or the $6 million maximum net asset value test.
3. Where the asset is a share or trust interest, separately confirm the 90% small business participation percentage or significant individual test is met.
4. Decide which of the four concessions to apply, and in what order, since applying the 50% active asset reduction, retirement exemption, and rollover to the same gain in combination can change the taxable outcome — this is where the ATO's guidance recommends professional tax advice, given the interaction between the concessions and the choices required.
5. Make any required choice (e.g. to apply the retirement exemption, or to opt out of the automatic 50% active asset reduction) no later than the day the income tax return for that income year is lodged.
6. Report the concession: sole traders and partners report it in the CGT section of the individual (supplementary) tax return; companies and trusts report it in the CGT schedule lodged with their tax return. If the retirement exemption is applied and superannuation contribution is required, the relevant CGT cap election form must also be given to the super fund before or when the contribution is made.
7. Keep records supporting the basic conditions and any specific concession claimed — valuations used for the net asset value test, evidence of the asset's active use, ownership dates, and (for the 15-year exemption or retirement exemption) evidence of age and retirement/incapacity — in case of an ATO review.

Documents you’ll typically need

• Records evidencing the CGT event and the capital gain calculation (sale contract, cost base records)
• Evidence the asset was an active asset for the required period (business use records, ownership dates)
• Valuation records supporting the maximum net asset value test, where relied on
• Aggregated turnover records, where relying on the CGT small business entity test
• For share/trust-interest disposals: records of small business participation percentages and significant individual status
• For the retirement exemption: evidence of age, and the CGT cap election form given to the superannuation fund if a contribution is required
• For the 15-year exemption: evidence of continuous ownership for 15 years and of retirement or permanent incapacity

Frequently asked

Reviewed 2026-08-16. Programmes change — confirm current eligibility, amounts and deadlines on the official page before you apply. CapEasy is a private consultancy and is not affiliated with any government authority.