What Is Small Business CGT Concession in Australia?

Selling a business, commercial property or another business asset can create a significant capital gain and potentially a substantial tax liability. However, eligible Australian small businesses may be able to reduce or defer some of the capital gain through the small business CGT concessions. Understanding the tax implications early, alongside reliable accounting services, can help business owners make informed decisions before a sale takes place.

These concessions are designed to provide tax relief when qualifying business assets are sold or otherwise trigger a capital gains tax (CGT) event. Depending on the circumstances, an eligible business may be able to reduce a capital gain, disregard it completely or defer it for a period of time.

Understanding the rules before selling an asset is important because eligibility depends on several conditions, including the size of the business, the nature of the asset and how it has been used.

What Are Small Business CGT Concessions?

Small business CGT concessions are special tax concessions available to eligible Australian small businesses. They can apply when a business makes a capital gain from a qualifying CGT asset.

The Australian Taxation Office (ATO) recognises four main small business CGT concessions:

• Small business 15-year exemption
• Small business 50% active asset reduction
• Small business retirement exemption
• Small business rollover

Each concession works differently, and satisfying the general eligibility requirements does not automatically mean every concession will be available.

For example, one business owner may qualify for the 50% active asset reduction, while another may also qualify for the retirement exemption or rollover depending on their circumstances.

Why Do Small Business CGT Concessions Matter?

Capital gains can arise from transactions such as selling a business, commercial premises, business goodwill or certain shares and interests in trusts or companies.

Without appropriate planning, a large capital gain can result in a significant tax liability.