How to Minimise Capital Gains Tax with Small Business CGT Concessions
Published on July 7, 2025
How to minimise Capital Gains Tax with Small Business CGT Concessions is a concern for many owners who want to keep more funds when selling a business asset. A large capital gain feels like a reward until the Capital Gains Tax (CGT) bill arrives and slices into the payment you planned for retirement, fresh investments or everyday cash flow.
The Australian Taxation Office (ATO) offers four CGT concessions designed for small business. Used wisely, these concessions can reduce, defer or even exempt the tax that arises when you sell an active asset. This article explains the challenge, the solutions and the simple steps to access the savings.
Why Capital Gains Tax Hits Small Businesses Hard
Most owners have a large share of their net assets tied up in property, equipment, goodwill or shares. When a CGT event occurs—such as the sale of a shop or the transfer of goodwill to new partners—the difference between the selling price and the cost base becomes a capital gain. That gain is added to your income tax, which can push you into a higher bracket at the worst possible time.
Temporary residents lose some relief, while an Australian resident may claim a 50 per cent cgt discount after holding an active asset for more than twelve months. Even then, the liability can still feel heavy unless the small business CGT concessions are applied.
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Passive versus active assets
Only active assets—those used in the business—qualify for concessions. Personal assets or passive investments generally miss out. Determining an asset’s status early prevents nasty surprises when contracts are signed.
Cash-flow pinch points
Big gains often arise when companies sell long-held property, restructure for asset protection or upgrade equipment that had been written off for income tax. Without planning, the tax can swallow funds earmarked for superannuation or the next venture.
Four Small Business CGT Concessions That Save You Tax
The ATO provides four concessions that can work alone or together. Each has its own rules, and the order of application matters.
Fifteen-Year Exemption
Own the CGT asset for at least fifteen years, be 55 or older and retire (or be permanently incapacitated), and the whole capital gain becomes an exempt amount. Companies and trusts can also access this concession when a significant individual meets these circumstances. The proceeds may be contributed to superannuation without affecting normal caps, turning a once-off profit into long-term retirement funds.
50 Per Cent Active Asset Reduction
Provided the asset was active for the required period, this reduction automatically halves any remaining gain. When combined with the general CGT discount, only 25 per cent of the original gain may stay taxable. Owners can opt out if another blend of concessions gives a better result.
Small Business Retirement Exemption
The small business retirement exemption allows individuals to exclude up to $500,000 in capital gains from tax over their lifetime. If you are under the age of 55, any amount you exclude must be placed into your superannuation fund. For those who are 55 or older, you have the choice to either keep the excluded amount or contribute it to your superannuation. Importantly, you do not need to retire or leave your job to make use of this exemption.
Small Business Rollover
Planning to acquire a replacement asset? The small business rollover lets you defer the gain for at least two years. If you buy or improve assets costing the same or more, the deferral continues until those assets are later sold. If plans change, the gain is brought to account in the future, giving you breathing room today.
Eligibility Tests Made Simple
Before claiming any concession, you must satisfy one of two gateway tests. You either operate as a small business entity with aggregated turnover under $2 million, or your combined net assets—including affiliates and connected companies—are below $6 million just before the sale.
The asset must also pass the active asset test by being used in the business for at least half of the ownership period, or for 7.5 years if owned longer than fifteen years. Shares or units qualify only when 90 per cent of the underlying assets are active assets.
Putting the Rules into Practice
Applying the concessions in the correct sequence maximises savings:
Fifteen-Year Exemption.
Subtract any capital losses.
General CGT discount for an Australian resident.
50 per cent Active Asset Reduction.
Small Business Retirement Exemption up to the lifetime cap.
Small Business Rollover for anything left.
Practical example
Georgia sells machinery for a $200,000 capital gain after five years. She applies the CGT discount ($100,000) and the Active Asset Reduction ($50,000). Because she is 52, Georgia uses $50,000 of her retirement exemption and moves it into superannuation. Her CGT bill is nil, and the full payment supports her future plans.
Conclusion
Small business CGT concessions are generous yet detailed. Missing a date, form or calculation can cost thousands. Our friendly team at ACT Tax Group can determine your eligibility, prepare clear records and lodge correct forms with the ATO. Whether you sell property, goodwill or shares, we explain the concessions in plain English and ensure you pay only the tax required—nothing more.
Ready to move forward? Contact us today for expert assistance and turn a complex CGT challenge into a tax-smart outcome.
Lukasz Klekowski
