When you sell a business, or a building or shares that your business uses, the capital gain can be large. The small business CGT concessions in Division 152 of the tax law are the main reason many owners pay far less than they expect, and sometimes nothing. They're also one of the most technical areas of tax, with conditions that fail on details people don't think to check.
This guide explains the basic conditions, the four concessions, the order you apply them in, a worked example with numbers, and how the concessions sit with the capital gains tax changes that start on 1 July 2027. Those changes are law, under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026.
What are the small business CGT concessions?
They're four separate reliefs that reduce, defer or wipe out a capital gain on an active asset of a small business:
| Concession | What it does | Headline conditions |
|---|---|---|
| 15-year exemption | Disregards the whole capital gain | Asset owned continuously for 15 years; you're 55 or over and retiring, or permanently incapacitated |
| 50% active asset reduction | Halves the gain (after any CGT discount) | Basic conditions only. Applies automatically unless you choose not to use it |
| Retirement exemption | Disregards up to $500,000 of gain over your lifetime | Under 55: the exempt amount must go into super. 55 or over: no super requirement |
| Rollover | Defers the gain | You acquire a replacement active asset, or improve an existing one, generally within one year before to two years after the sale |
The concessions stack. A gain can be cut by the CGT discount, then the 50% active asset reduction, then the retirement exemption, so a large sale can end up with little or no tax.
Who is eligible? The basic conditions
Every concession starts with the same gate. If you fail the basic conditions, none of the four applies.
1. You're small enough: turnover or net assets
You must meet one of these:
- CGT small business entity: aggregated turnover under $2 million. "Aggregated" means your turnover plus that of businesses connected with you or your affiliates. This trips up groups that run more than one entity.
- Maximum net asset value (MNAV) test: the net value of your CGT assets, plus those of connected entities and affiliates, is $6 million or less just before the sale. You leave out personal-use assets, your home (to the extent it isn't used in the business) and super.
- Passively held asset: you don't run the business yourself, but the asset is used in a business run by an affiliate or connected entity that is a small business entity. The classic case is a family trust that owns a warehouse leased to the family company.
- Partner: the asset is a partnership asset, or your asset used in the partnership's business.
These thresholds are not indexed. They have been the same for years and are the same in 2026–27.
Watch out: The MNAV test counts assets at market value, not book value, and includes connected entities you may have forgotten about. A 2025 Full Federal Court decision held that a minority interest isn't discounted for MNAV purposes on an arm's-length sale of a whole business, so don't assume a lower value for a minority stake.
2. The asset is an active asset
An active asset is one used, or held ready for use, in carrying on a business by you, your affiliate or a connected entity. Goodwill of a business is an active asset. So is a shop, factory or office the business trades from.
The active asset test is met if the asset was active for:
- at least half the period you owned it (up to the sale, or up to when the business stopped, if that was within the last 12 months), or
- at least 7.5 years, if you owned it for more than 15 years.
Assets whose main use is to derive rent are generally not active assets, nor are most shares and financial instruments (unless they're shares in a company that itself passes an 80% active asset look-through test). A 2026 tribunal decision on inherited farmland confirmed that stated intention isn't enough: the asset must actually be used, or objectively ready for use, in the business.
3. Extra conditions for shares and trust units
If you're selling shares in a company or units in a trust, rather than the business assets themselves, you also need:
- a significant individual (someone with at least a 20% direct and indirect interest), and the seller must be a CGT concession stakeholder or the stakeholders must together hold at least 90% of the seller, and
- the company or trust must pass the 80% active asset test (looked through to its own assets).
Basic conditions at a glance
| Check | Pass if | Common reason it fails |
|---|---|---|
| Size | Turnover under $2m, or net assets $6m or less | Forgetting connected entities, a spouse's investment company, or market value of property |
| Active asset | Used in the business for half the ownership period (or 7.5 years if held over 15) | Property was rented to unrelated tenants for years before the business moved in |
| Shares or units | Significant individual + 80% look-through | Too much cash or investments sitting in the company |
| Partnership events | Membership interest rules met | Selling a partnership interest without meeting the 2018 integrity rules |
How does each concession work?
The 15-year exemption
If it applies, the entire capital gain is disregarded. You don't need any other concession, and capital losses aren't wasted against it.
You need:
- the basic conditions;
- continuous ownership for at least 15 years up to the sale;
- for an individual, you're 55 or older and the sale is in connection with your retirement, or you're permanently incapacitated;
- for a company or trust, a significant individual for at least 15 years in total during ownership, and that person is 55 or over and retiring, or permanently incapacitated.
"In connection with retirement" doesn't mean you can never work again. A significant reduction in hours or a change in the nature of your work can be enough. But it has to be real.
The 50% active asset reduction
After any CGT discount (or, from 1 July 2027, after indexation), the remaining gain is halved. It applies automatically if you meet the basic conditions, unless you choose not to apply it. That choice matters: sometimes skipping it leaves more gain for the rollover, which can be worth more if you plan to reinvest.
The retirement exemption
You can disregard capital gains up to a lifetime limit of $500,000 per individual. If you're under 55 when you make the choice, the exempt amount must be paid into a complying super fund or retirement savings account. You must make the choice in writing, keep a record of the amount, and do it by the time you lodge the return for the year of the sale.
For a company or trust, the exempt amount must be paid to one or more CGT concession stakeholders, within set timeframes, in the proportions you nominate.
The rollover
You defer the gain by acquiring a replacement active asset, or spending on capital improvements to an existing one. The replacement must generally be acquired between one year before and two years after the sale. If you don't acquire one in time, or the replacement stops being an active asset, the deferred gain comes back.
Putting the money into super
Amounts covered by the 15-year exemption and the retirement exemption can be contributed to super under the CGT cap without counting towards your non-concessional cap. The CGT cap is indexed: it's $1,935,000 for 2026–27. You must elect to use it, using the ATO's form, by the time you make the contribution. Whether a contribution suits you is a question for a licensed financial adviser; we work alongside them on the tax and the timing. See our super contribution caps guide.
In what order do you apply them?
The order matters, because applying them out of order can waste losses or concessions.
- Check the basic conditions.
- Apply the 15-year exemption. If it applies, stop. The whole gain is gone.
- Apply current-year and prior-year capital losses.
- Apply the CGT discount (for the part of the gain that accrued before 1 July 2027) and indexation (for growth after that date).
- Apply the 50% active asset reduction.
- Apply the retirement exemption and/or rollover to what's left.
- Whatever remains is your net capital gain, taxed at your rates.
Our capital gains tax agent runs the basic conditions and the concession order from your asset register and financial statements. Your accountant reviews every test, especially MNAV and the active asset periods, and signs off before anything is relied on.
Worked example: selling a business before and after 1 July 2027
Hypothetical, rounded. Ignores other income, Medicare levy and capital losses.
Say Michelle, aged 58, has run a consulting business as a sole trader for 10 years. Turnover is $1.4 million. She built the goodwill herself, so its cost base is nil. She's selling the business, and the buyer is paying $800,000 for goodwill.
She doesn't qualify for the 15-year exemption (only 10 years). She does pass the basic conditions.
Scenario A: contract signed in May 2027
| Step | Amount |
|---|---|
| Capital gain on goodwill | $800,000 |
| Less 50% CGT discount | –$400,000 |
| Less 50% active asset reduction | –$200,000 |
| Remaining gain | $200,000 |
| Less retirement exemption (she's over 55, no super requirement) | –$200,000 |
| Net capital gain | $0 |
She uses $200,000 of her $500,000 lifetime retirement limit.
Scenario B: contract signed in 2029
Assume the goodwill was worth $700,000 just before 1 July 2027 (supported by a valuation), she sells for $800,000 in 2029, and CPI rises 6% over the two years after 1 July 2027 (an assumed figure for illustration).
| Step | Amount |
|---|---|
| Pre-2027 gain ($700,000 less nil cost base) | $700,000 |
| Less 50% CGT discount on pre-2027 gain | –$350,000 |
| Post-2027 gain ($800,000 less indexed $742,000) | $58,000 |
| Gain before small business concessions | $408,000 |
| Less 50% active asset reduction | –$204,000 |
| Remaining gain | $204,000 |
| Less retirement exemption | –$204,000 |
| Net capital gain | $0 |
She still pays nothing here, because the retirement exemption covers the remainder. Now change one fact: if the remaining gain after the 50% reduction were larger than her unused $500,000 limit, the excess would be taxed, and the post-2027 part of it could be caught by the new 30% minimum tax. And if she hadn't kept a valuation, she'd be relying on the apportionment method the Government is still developing.
What changes the result most: the gap between the business's value at 30 June 2027 and the sale price, the size of the gain against the $500,000 lifetime limit, and whether the basic conditions are still met in the year of sale.
How do the 1 July 2027 CGT changes affect the small business concessions?
The capital gains tax changes in the Tax Reform No. 1 Act 2026 are law and apply to CGT events from 1 July 2027. The contract date usually sets the date of the CGT event, not settlement. Here's what they mean for business owners.
| Change | What it means for the concessions |
|---|---|
| The 50% CGT discount is replaced by CPI indexation for growth from 1 July 2027 (individuals, trusts and partnerships) | Step 4 of the order changes. Growth to 30 June 2027 keeps the discount; growth after is indexed instead. Companies never had the discount, so nothing changes for them here |
| Assets held at 30 June 2027 are treated as sold and reacquired at that date, with the gain deferred until you actually sell | You'll need a market value just before 1 July 2027, or the apportionment method the Government is developing, to split the gain |
| A 30% minimum tax applies to resident individuals' post-2027 real capital gains | Relevant where gain is left after the concessions. People already on 30% or more, and recipients of certain income support payments in that year, aren't affected |
| The four small business concessions are retained | The 15-year exemption, 50% reduction, retirement exemption and rollover continue |
| The 50% active asset reduction opens to businesses with turnover under $10 million (from the income year that includes 1 July 2027) | A wider group can halve the gain. The $2 million test still applies to the other three concessions, as does the $6 million MNAV alternative |
| Pre-CGT assets (acquired before 20 September 1985) come into the CGT net for growth after 30 June 2027 | Growth to 30 June 2027 stays exempt. See our guide to pre-CGT assets and the 2027 changes |
Two practical points follow.
You don't need to sell before 30 June 2027 to keep the discount on past growth. The law takes a snapshot for you. What you need is good evidence of value at that date. For a business, that usually means a valuation of goodwill and any property.
Selling or restructuring before 30 June 2027 can still be worth modelling. If your business is in the wrong structure (say, a sole trader exposed to personal liability), moving it into a company or trust before 30 June 2027 lets you use the discount and the concessions on the way in. A rollover may be cheaper again. It depends on stamp duty, the concessions you'd use up, and what you plan to do with the business. Our guide to strategies before 30 June 2027 covers this, and the full detail of the discount change is in our guide to the CGT discount changes from 1 July 2027.
Key point: How the deemed 30 June 2027 reacquisition interacts with the 15-year ownership period and the active asset test periods is a question to confirm for your asset before you rely on it. ATO guidance on the transition is still being issued. We check the current position at the time we advise.
Which concession should you use?
| Your situation | Usually the best first look |
|---|---|
| 55+, retiring, owned the asset 15+ years | 15-year exemption. Whole gain gone, and the money can go into super under the CGT cap |
| 55+, retiring, but under 15 years | Discount (pre-2027 growth) + 50% reduction + retirement exemption |
| Under 55, selling and stepping back | Same stack, but the retirement-exempt amount must go to super. Check whether you need the cash first |
| Selling one business and buying another | Rollover, possibly instead of the 50% reduction, so more of the gain is deferred |
| Moving the business into a company or trust | Compare the restructure rollovers against using the concessions on the transfer. See our business restructuring service |
| Turnover between $2m and $10m, net assets over $6m | From 2027–28, possibly the 50% active asset reduction only. The other three remain out of reach |
| Selling shares in your company | Significant individual, stakeholder and 80% active asset tests first. Clean out surplus cash or investments well before the sale if they put the 80% test at risk |
Mistakes we see with the small business CGT concessions
- Leaving out connected entities in the turnover or MNAV test, such as a spouse's company, a family trust you control, or a business you have a 40% interest in.
- Using book values for MNAV. The test uses market value. A property bought for $900,000 years ago may be worth far more.
- A rental property presumed active. If it was leased to unrelated tenants for most of the time you owned it, it probably isn't.
- Selling shares when the company holds too much cash. Surplus cash and investments can fail the 80% look-through test.
- Missing the retirement exemption paperwork. The choice must be in writing, by the time you lodge, with the amounts recorded. Under 55, the super contribution must be made on time.
- Taking the 50% reduction automatically when choosing not to would have let the rollover defer more.
- Not getting a 30 June 2027 valuation for business assets you'll still hold after that date. Without one, you're relying on a formula you can't yet see.
- Assuming the 15-year exemption without checking the significant individual history for a company or trust.
- Signing before modelling. The contract date fixes the year and the rules. Allocation of the price between goodwill, plant and stock also changes the tax, so agree it with the buyer before you sign.
How BPAG helps
Small business CGT concessions are usually part of something bigger: a sale, a retirement or a restructure. We bring all of it together.
- Before the sale. We test the basic conditions using your real numbers and connected entities, run each concession in order, and show the tax before and after 1 July 2027. Our capital gains tax advice service covers this work.
- During the sale. We work with your solicitor on the price allocation, the GST going concern treatment and the timing. Our guide to tax on selling a business covers the full picture, and our selling a business service is where we manage it end to end.
- After the sale. We prepare the return, make the choices in writing, and coordinate super contributions with your financial adviser.
- For complex questions. Where the facts are borderline, our private ruling agent helps frame an application to the ATO. Your accountant decides whether a ruling is worth it, and finalises it.
The AI agents draft. A qualified accountant reviews and signs off every calculation and every piece of advice, and nothing goes to you or the ATO without a person approving it.
Frequently asked questions
Can a company use the small business CGT concessions?
Yes. A company or trust can access the concessions on its own active assets if it passes the basic conditions. For the 15-year and retirement exemptions it also needs a significant individual (someone holding at least 20%), and getting the exempt amount out to shareholders tax-free has its own rules and timing. Plan this before the contract, not after.
Do I have to put the retirement exemption money into super?
Only if you're under 55 when you make the choice. Then the exempt amount must be paid into a complying super fund or retirement savings account. If you're 55 or older, there's no super requirement, although you can still choose to contribute it.
Can I use the concessions on a rental property?
Usually not. An asset whose main use is to earn rent is generally excluded from being an active asset. The exception is property you or a connected entity or affiliate use in your own business, such as a factory owned by your family trust and leased to your trading company.
What if my turnover is over $2 million?
You can still qualify through the maximum net asset value test, which looks at the net value of your assets and those of connected entities and affiliates, capped at $6 million. And from the income year that includes 1 July 2027, the 50% active asset reduction alone is open to small businesses with turnover under $10 million.
Is the 30 June 2027 valuation needed if I plan to use the 15-year exemption?
If the 15-year exemption will clearly apply, the whole gain is disregarded and the split between pre- and post-2027 growth matters less. But plans change, and a credible 30 June 2027 valuation is cheap insurance if the exemption ends up failing on a technical condition.
How long do I have to buy a replacement asset under the rollover?
Generally from one year before to two years after the CGT event. If you don't acquire a replacement active asset in that window, or you stop using it in the business later, the deferred gain comes back into tax.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.