What Is Small Business CGT Concession in Australia?

For many concessions, an asset generally needs to have been an active asset for at least half of the relevant ownership period. There are special rules for the 15-year exemption, where the asset generally needs to have been an active asset for at least 7.5 years of the ownership period.

This is one reason why CGT planning should happen before an asset is sold. The way an asset has been used over several years can affect whether the concession is available.

The Four Small Business CGT Concessions Explained

1. Small Business 15-Year Exemption

The 15-year exemption can be one of the most valuable concessions because an eligible capital gain can potentially be completely disregarded.

Generally, the CGT asset must have been continuously owned for at least 15 years and the other basic conditions must be satisfied.

For an individual, the CGT event generally needs to happen when the individual is at least 55 years old and the event occurs in connection with their retirement, or the individual is permanently incapacitated.

There are additional rules for companies and trusts, including requirements concerning significant individuals.

For example, imagine a business owner has operated a business for more than 15 years and is selling a qualifying business asset as part of their retirement. If all relevant conditions are satisfied, the capital gain may potentially be disregarded under the 15-year exemption.

This concession is highly valuable but also highly conditional, so the ownership history and circumstances should be reviewed carefully.

2. Small Business 50% Active Asset Reduction

The small business 50% active asset reduction can reduce a qualifying capital gain by 50%.