What Is Small Business CGT Concession in Australia?

This concession is separate from the general CGT discount.

For example, an individual or trust may potentially apply the general CGT discount first, where eligible, and then apply the small business 50% active asset reduction to the remaining gain. This can significantly reduce the taxable capital gain.

Companies, however, cannot generally use the ordinary 50% CGT discount, although a company may still qualify for the small business 50% active asset reduction if the relevant conditions are met.

The calculation and interaction between different concessions should be reviewed carefully rather than assuming that every available percentage reduction can simply be applied.

3. Small Business Retirement Exemption

The retirement exemption can allow an eligible taxpayer to disregard all or part of a qualifying capital gain, subject to specific requirements.

There is a lifetime CGT retirement exemption limit of $500,000 for an individual. Previous amounts that have been exempted under the retirement exemption can reduce the remaining lifetime limit.

Importantly, using this concession does not necessarily mean the business owner must actually stop working or wind up the business.

If an individual is under 55 immediately before choosing the retirement exemption, the exempt amount generally needs to be paid into a complying superannuation fund or retirement savings account, subject to the relevant rules. If the individual is 55 or older when making the choice, this superannuation payment requirement does not apply.

The rules are different for companies and trusts because payments may need to be made to CGT concession stakeholders.

4. Small Business Rollover

The small business rollover can allow an eligible business to defer all or part of a capital gain rather than paying tax on the gain immediately.