Four capital gains tax concessions to help small businesses

As a small business owner, you can take advantage of one of four capital gains tax (CGT) concessions offered by the Australian Tax Office.

These allow you to reduce, disregard or defer some capital gain from an active asset used in your small business.


These concessions become available when you dispose of an active asset, provided you meet certain eligibility requirements.

First, you must be one of the following:

  • Running a business with a turnover of less than $2 million.
  • A partner in a small business partnership where the asset is either an interest in the partnership or an asset you own but is used in the business.
  • Not running a business but your asset is used in a small business.

Next, your asset must be an active asset. This means the asset must have been used in a small business for either:

  • At least 7.5 years if you’ve owned it for less than 15 years.
  • Half the amount of time you’ve owned it if you’ve had it for more than 15 years.

These concessions are in addition to the CGT discount, which is a 50% reduction in CGT for the sale of assets you owned for 12 months or longer.

Small business 50% active asset reduction

This concession provides small businesses or individuals with a 50% reduction on capital gain and is applied automatically if you meet the eligibility criteria.

Small business retirement exemption

If you are below the age of 55, you may choose to transfer your capital gains into your superannuation fund. But, there is a lifetime limit of $500,000.

It may work out better for you to opt for the retirement concession, taking advantage of the full exemption on capital gains, rather than the automatic 50% active asset reduction.

Small business 15 year concession

If you have owned the asset continuously for 15 years, you won’t be required to pay CGT when you dispose of the asset.

This concession applies to individuals over the age of 55 where the sale or disposing of the asset was in relation to your retirement or in situations where the asset owner has become permanently incapacitated.

Small business roll-over

This concession allows you to defer some or all of your capital gain for up to two years. If you buy a new asset or undertake improvements to an existing asset, these gains can be deferred until you sell or dispose of the asset.

But, if you choose to use the roll-over, you must be aware of certain consequences.

First, the replacement asset or improved asset must be active by the end of the assessment period. So, if you sold off some land and deferred the CGT, you must have bought new land and started using it for your business before the assessment period is over. If at a later stage you dispose of the new asset or stop using it in your business, CGT will apply.

Second, if the amount you rolled over is more than the cost of your replacement asset, you will be required to pay the CGT.

Third, if you do not buy a replacement or make the capital improvements to your existing asset within the assessment period, the roll-over will end and you will have to pay the CGT.

Claiming CGT concessions

You are allowed to apply for as many of the small business CGT concessions as you are eligible for. But, each concession has its own requirements and additional eligibility criteria. It is recommended you speak to an accountant to take full advantage of the concessions available to you.

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