Small business CGT concessions: what you should know

If you’re a small business owner in Australia planning to sell or restructure your business, capital gains tax (CGT) may apply. However, the Australian tax system offers small business CGT concessions that can significantly reduce, defer or even eliminate CGT if certain conditions are met.

Here’s a clear overview of what these concessions are and when they may apply. Under Division 152, eligible small businesses may access up to four CGT concessions: • 15-year exemption – a full CGT exemption if the asset has been owned for at least 15 years and retirement conditions are met • 50% active asset reduction – reduces the capital gain by 50% • Retirement exemption – allows up to $500,000 of capital gains to be disregarded over a lifetime • Small business rollover – defers CGT when replacing a business asset These concessions can often be combined to maximise tax savings.

To qualify, you generally need to meet the basic conditions, including:

• A CGT event occurs (such as selling a business asset)
• The asset would normally result in a capital gain
• You are a small business entity or meet the $6 million net asset value test
• The asset sold is an active business asset

Different rules apply to shares in companies or interests in trusts, so structure matters. When restructuring a business, owners often consider CGT rollovers. However, small business CGT concessions can be more effective, as they may provide permanent tax savings, not just deferral. A key benefit is the market value cost base uplift, which can reduce CGT on future sales. These concessions also offer more flexibility around ownership and consideration compared to traditional rollovers.

Small business owners can benefit in several ways:

• Reduced or eliminated CGT
• Potential superannuation contributions under the CGT cap
• Greater flexibility in business restructuring
• Ability to apply concessions on an asset-by-asset basis

Small business CGT concessions can be powerful tools for tax planning, business sales and succession planning, but they are complex and must be applied correctly. Early advice and structuring are essential.

Thinking about selling or restructuring your business? BTMH can help you understand your CGT position and structure your business in a tax-effective way.