Most business owners only sell once. That one transaction can shape the rest of their financial life. You have spent years building it. The last thing you want is to hand a large slice of the proceeds to the ATO.
The good news? Australian tax law gives small business owners some of the most generous CGT concessions in the world. Many business owners pay little or no CGT on their sale. Some pay nothing at all.
This guide walks you through exactly how that works.
| Disclaimer: This article provides general information only. It does not constitute tax or legal advice. Tax outcomes depend on your individual circumstances. Always speak with a qualified tax adviser or accountant before making decisions about a business sale. |
How CGT Applies to a Business Sale in Australia
When you sell a business asset — whether that is shares in a company, goodwill, equipment, or property used in the business — the ATO treats any profit as a capital gain.
The gain is the difference between what you paid for the asset (the cost base) and what you received on sale (the capital proceeds).
That gain then gets added to your assessable income for the year. Unless you reduce it first.
There are two important baseline concessions before we even get to the small business rules:
- The 50% general CGT discount: If you held the asset for more than 12 months as an individual or trust, you can halve the gain before tax.
- Indexation: Available for assets acquired before 11:45 am on 21 September 1999 — lets you adjust the cost base for inflation.
On top of these, small businesses in Australia have access to four additional concessions. These are the real game-changers.
The 4 Small Business CGT Concessions
The Australian Government introduced the small business CGT concessions specifically to help business owners transition out of their businesses. They are found in Division 152 of the Income Tax Assessment Act. Income Tax Assessment Act
To access them, you need to meet one of two basic eligibility tests:
- Your aggregated turnover is less than $2 million, OR
- The net value of assets you own (including connected entities and affiliates) is less than $6 million.
You also need to satisfy the active asset test. Think of it as a halfway rule. The asset needs to have been working in your business for at least half your ownership period
Meet those conditions, and you unlock four powerful tools.
The 15-Year Exemption
This is the most powerful concession available to Australian small business owners. It can eliminate your CGT liability entirely.
If you owned the business asset for at least 15 years, and you are either 55 or older and retiring or permanently incapacitated, the entire capital gain is exempt. You pay zero CGT.
There is no dollar cap. There is no requirement to contribute the proceeds to superannuation. You simply keep the money.
| Example: Here is what that looks like in practice. Seventeen years of hard work. A $1.8 million gain on sale. The 15-year exemption wipes out the entire CGT liability. You walk away with every dollar of that gain intact. |
The 15-year exemption is the first concession you should check. If it applies, you may not need any of the others.
The 50% Active Asset Reduction
Not everyone qualifies for the 15-year exemption — and that is fine. This concession steps in and cuts your capital gain in half.
It works on any asset that has been actively used in your business. You do not need to be retiring. You do not need to be any particular age.
Add the general 50% CGT discount for assets held over 12 months and the total reduction reaches 75%.
| Example: Active assets are the working parts of your business — the goodwill, the equipment, the premises you trade from. Sell any of these and the reduction applies. A $400,000 gain becomes $200,000 after the 50% discount. Then $100,000 after the active asset reduction. That is your taxable amount. Nothing more. |
For most business owners, this concession alone produces significant tax savings.
The Retirement Exemption
The retirement exemption lets you exclude up to $500,000 of capital gains from tax over your lifetime.
This cap is cumulative. You lose it once you use it—whether in a single sale or across multiple sales. Plan carefully.
If you have not yet turned 55, there is one condition. You must pay the exempted money into a complying super fund or retirement savings account. You cannot simply pocket it. If you are 55 or older, you can keep the money and still claim the exemption.
You do not need to actually retire to use this concession. The name is a little misleading. You simply need to meet the basic eligibility conditions.
| Example: You sell your business at age 48. After applying the 50% active asset reduction, your remaining gain is $300,000. You contribute $300,000 to your super fund. You claim the retirement exemption and pay zero CGT on that amount. The contribution counts towards your non-concessional contributions cap. |
The retirement exemption is a superb way to accelerate your superannuation balance as you exit your business.
Using Superannuation Strategically
The intersection of small business CGT concessions and superannuation is one of the most powerful planning opportunities in Australian tax law.
Individuals who make superannuation contributions under the retirement exemption are making small business capital gains tax contributions. They are not subject to the standard non-concessional cap of $120,000 per year (2024-25 figure — confirm current limits with your adviser).
You can contribute up to $1.78 million in lifetime small business CGT contributions (the CGT cap amount — this figure is indexed annually, check the current ATO figure).
This means selling your business can dramatically boost your superannuation balance in a single transaction — far beyond what you could achieve through regular contributions.
For business owners who have prioritised reinvesting in the business over making super contributions, this is a crucial catch-up mechanism.
The 2-Year Planning Window
Here is a strategy that many business owners overlook: you do not need to have everything sorted at the time of sale.
The ATO gives you a two-year window after a sale event to apply certain small business CGT concessions — particularly the retirement exemption — and make contributions to super.
This means you can sell your business, receive the proceeds, and still have time to plan the most tax-effective allocation of those funds.
However, do not take this as an excuse to delay planning. The earlier you start, the better.
| Key Tip: The two-year window exists as a safety net — not a strategy. Start your tax planning at least 12 to 24 months before you intend to sell. Pre-sale restructuring, asset timing, and entity structure decisions must be made well in advance to be effective. |
Early planning also helps you meet the active asset test cleanly and avoid disputes with the ATO about eligibility.
Action Steps: Start Here
You do not need to understand every detail of CGT law. Getting the steps right — and in the right order — makes all the difference. Here is where to start.
- Step 1 — Check your basic eligibility Two tests open the door. Your annual turnover must be under $2 million, or your net assets must be under $6 million. Meet either one and you are in. If you are close to either threshold, do not guess. Get advice early — the difference can be significant.
- Step 2 — Review your ownership history Go back through your records. Write down when you acquired each asset. Then check which assets pass the active asset test — meaning they were actively used in your business for the required period. This step often uncovers opportunities business owners did not know they had.
- Step 3 — Start planning early. Give yourself at least 12 to 24 months before the sale. Pre-sale restructuring must happen before you sign anything. Once the contract is in place, many of your options disappear. Early planning keeps all doors open.
- Step 4 — Model all four concessions together Do not look at each concession in isolation. The 15-year exemption, the 50% active asset reduction, the rollover, and the retirement exemption can work together in powerful combinations. A good tax adviser will map out every scenario and find the combination that puts the most money in your pocket.
- Step 5 — Explore the superannuation opportunity This is the step most business owners underestimate. Know your remaining CGT cap amount. Know your non-concessional contribution room. A tax adviser and financial planner working together can help you use the sale proceeds to build your super balance in ways that regular contributions never could.
- Get a current business valuation. Understanding what your business is worth helps you plan and set the right sale price.
- Review your entity structure. Individuals, trusts, and companies are all treated differently. Ensure your structure supports the concessions you want to use.
Frequently Asked Questions
| Q: Can I access the small business CGT concessions if I sell shares in my company?A: Yes, often. Shares in a company can qualify as active assets if 80 percent or more of the company’s assets are active assets used in the business. This is called the active asset test for shares. The specific rules are complex — get advice specific to your situation. |
| Q: What if I co-own the business with a partner?A: Each owner applies the concessions individually based on their share of the gain. You each need to meet the basic conditions in your own right. Planning co-owned business sales together is important to ensure both parties optimise their position. |
| Q: I am not yet 55. Can I still use the retirement exemption?A: Yes. If you are under 55, you must contribute the exempt amount to a complying superannuation fund or retirement savings account within 30 days of receiving capital proceeds (or seven days if you are a company or trust). This is a hard deadline — do not miss it. |
| Q: Do I need to sell the entire business to access these concessions?A: No. The concessions apply to individual active assets. You can sell part of your business — for example, a piece of goodwill or a commercial property used in the business — and still access the concessions on that asset. |
| Q: My business has made a loss in some years. Does that affect eligibility?A: Not directly. Business profitability does not determine access to the small business CGT concessions. What matters is the asset test, the active asset test, and the basic conditions. Your accountant can confirm whether you qualify. |
| Q: Can I use the rollover concession to delay paying CGT?A: Yes. The small business rollover lets you defer a capital gain for up to two years, provided you acquire a replacement asset or incur capital expenditure on an active asset within that period. This gives you time to reinvest without an immediate tax bill. |
Share Your Experience
Have you sold a business and navigated the CGT concessions? Or are you planning a sale and wondering where to start?
We would love to hear from you. Drop a comment below and tell us about your situation, your questions, or what you wish you had known earlier. Your experience might help another business owner in the same position.
This is a community of people who have built real things. Your insights matter here.
Ready to Protect What You Have Built?
You have worked hard to build your business. The concessions are there for you. But they only work if you plan ahead.
The difference between a good outcome and a great outcome is usually timing and strategy — not luck.
| Talk to a Tax Specialist Before You Sell. Start your tax planning now. |
Do not leave this to the last minute. The earlier you act, the more options you have. Start the conversation today.
Legal & Tax Disclaimer
This article provides general information about Australian capital gains tax concessions for small business owners. It is not financial, tax, legal, or professional advice of any kind.
Tax laws change regularly. All figures — including contribution caps, thresholds, and exemption amounts — should be confirmed with the ATO or a registered tax agent before you rely on them. Every business is different. The examples used here are illustrative only and may not reflect your specific circumstances.
Before making any decisions about the value, sale, or structure of your business, always engage a qualified professional — such as a registered accountant, tax adviser, financial planner, business broker, or solicitor — who can properly assess your individual situation.
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