Key takeaways
The small business CGT concessions can reduce or entirely eliminate tax on the sale of a business or its assets, and remain unchanged despite broader CGT reforms in the 2026–27 Federal Budget.
Access depends on meeting the “active asset” requirement and passing either the <$2 million turnover test or the $6 million net asset value test, which are thresholds that have not been indexed since 2007.
Early planning is critical and eligibility should be assessed well before any sale or restructure, particularly given the proposed removal of the 50% CGT discount from 1 July 2027.
The small business Capital Gains Tax (CGT) concessions in Division 152 of the Income Tax Assessment Act 1997 (Cth) (ITAA97) remain one of the most powerful tax relief measures available to business owners. Properly applied, they can significantly reduce, and in some cases entirely eliminate capital gains tax liabilities arising on the sale of a business or its assets.
These concessions extend beyond direct asset disposals to include the sale of shares in companies and units in trusts that carry on an active business. Notably, they were left unchanged in the 2026–27 Federal Budget, despite broader reforms to the capital gains tax regime, including the proposed removal of the general 50% CGT discount for gains arising after 1 July 2027.
What are the four concessions in Division 152?
1. 15-year Exemption (Subdivision 152-B)
Allows a taxpayer to completely disregard a capital gain on the realisation of an active asset held for at least 15 years, where the disposal is in connection with the retirement of an individual aged 55 or over, or their permanent incapacity.
2. 50% active asset reduction (Subdivision 152-C)
Provides for a 50% reduction to the gain and can be applied to all structures, including companies.
3. Retirement exemption (Subdivision 152-D)
Which can disregard a gain up to a lifetime limit of $500,000 per individual, where the proceeds are used in connection with retirement, with the exempt amount able to be contributed to superannuation.
4. Small business rollover (Subdivision 152-E)
Allows the taxpayer to defer the gain where a replacement active asset is acquired within the period commencing one year before, and ending two years after the disposal.
The 15-year exemption disregards the gain entirely and takes priority over the others.
The remaining concessions, where applied together, can in certain instances reduce the CGT payable on a sale to $nil, including via application of the general 50% CGT discount in conjunction with the remaining Concessions.
The availability of the concessions is subject to the basic conditions in Subdivision 152-A first being met, being broadly, that:
- the asset must be an “active asset”; and
- the taxpayer must satisfy one of the two financial tests below.
For completeness, some further conditions apply for a sale of shares or units.
Financial threshold tests
The first financial threshold test is satisfied where the taxpayer is a “CGT small business entity”, being a business with an aggregated turnover of less than $2 million.
The second, alternative, financial threshold test is the maximum net asset value test (MNAV test) that provides that the net value of the CGT assets of the taxpayer, its connected entities and its affiliates must not exceed $6 million just before the relevant CGT event.
Both figures are fixed dollar amounts. Neither has increased since 2007, when the MNAV threshold was lifted from $5 million to $6 million, and neither is indexed for inflation. The thresholds have stood while revenues, property values and goodwill have risen around them.
A business that once fitted comfortably within them may now sit outside, notwithstanding that it remains, in every ordinary sense, small. A single appreciating property can absorb much of the $6 million on its own.
How the concessions can apply in practice
Consider a graphic design and branding agency run through a company whose shares are held by a family trust.
The business operates from a shop front that the trust acquired a year before the business began, for $1 million, and which it leases to the company.
In its first two years the business turned over between $50,000 and $100,000. In its third year it won two Queensland government contracts, turnover climbed steeply, and the owners decided to sell the premises and take larger rooms.
Fortuitously, when the business owners were looking to sell, a developer, drawn by the shop front site's eligible apartment zoning, made an offer and bought the property for $7 million, producing a gain of $6 million, with turnover for the year of sale coming in at $2.5 million.
At first glance, on those figures the business looks too large in the year of sale to be a CGT small business entity.
However, eligibility for the Concessions depends on the detailed application of the financial threshold tests. In this case, the turnover test may be satisfied by reference to the prior income year, when turnover was below $2 million (noting that the trust’s rental income is included in that calculation).
If that test is met, the premises would be treated as an active asset, given its use in the business of the company. As a result, the capital gain on sale should be eligible for the concessions, allowing the taxable component of the gain to be reduced for CGT purposes.
Preparing for a sale or succession
Where a sale or succession event is upcoming, it is prudent to confirm eligibility for the Concessions well before a contract is signed, rather than at settlement, given that the CGT liability is crystallised at time of entry into the sale contract.
This is particularly so where the Federal Budget measures announced provide, subject to their enactment, that the general 50% CGT discount will no longer apply to gains arising from 1 July 2027.
As such, you may wish to seek advice if:
- your business premises or other assets have appreciated to the point where the $6 million MNAV test is in question;
- your turnover is at or approaching $2 million; or
- you are considering a restructure ahead of a sale.
We would caution against restructuring or disposing of assets in anticipation of a sale until the position has been properly assessed.
The small business CGT concessions can deliver substantial tax outcomes, but their application is highly technical and increasingly constrained by thresholds that have not kept pace with economic growth. As the example illustrates, eligibility often turns on detailed considerations, including timing, structure and the precise application of the financial tests. With broader CGT reforms on the horizon, careful planning well in advance of any sale or succession event is essential to preserve access to these concessions and optimise the overall tax position.