For many business owners, the sale of the business or the building it trades from is the biggest tax event of their life. The small business CGT concessions can reduce the tax on that gain substantially, sometimes to nil, and they have survived the 2026 tax reforms intact. What has changed is the general 50% CGT discount, which is being replaced for gains accruing from 1 July 2027. This guide explains the four concessions, who qualifies, and what the new rules mean for timing a sale.
The basic conditions
Before any of the four concessions apply, the capital gain must come from a CGT event on an asset, and you must pass at least one of these tests:
- Small business entity: aggregated turnover of less than $2 million (the CGT concessions use $2 million, not the $10 million threshold used for other small business concessions), or
- Maximum net asset value test: net assets of you and your connected entities and affiliates of no more than $6 million, excluding your home and super, or
- The asset is used in a business carried on by your affiliate or connected entity that qualifies
The asset must also pass the active asset test: it was used, or held ready for use, in carrying on a business. If you owned it for 15 years or less, it must have been active for at least half the ownership period; if more than 15 years, for at least 7.5 years. Rental property is generally not an active asset, even if leased to a business, unless leased to a connected entity or affiliate that uses it in its business. For shares or trust interests, further tests apply, including having a significant individual with at least a 20% interest.
The four concessions
| Concession | Effect | Key conditions |
|---|---|---|
| 15-year exemption | The whole gain is disregarded | Asset continuously owned for 15 years, and you are 55 or older and retiring, or permanently incapacitated |
| 50% active asset reduction | Gain reduced by 50% | Basic conditions met; applies after the general CGT discount |
| Retirement exemption | Up to $500,000 lifetime limit disregarded | If under 55, the exempt amount must be contributed to super |
| Rollover | Gain deferred | Buy a replacement active asset or spend on an existing one, from one year before to two years after the sale |
The concessions can be combined. A typical sale by an individual who does not qualify for the 15-year exemption applies the 50% CGT discount, then the 50% active asset reduction, then the retirement exemption or rollover to the remaining gain. On a gain of $800,000, the discount and active asset reduction together bring the gain to $200,000, which the retirement exemption can then reduce to nil. Amounts contributed to super under the 15-year and retirement exemptions count against the lifetime CGT cap ($1,935,000 for 2026-27), not the non-concessional cap.
What changes from 1 July 2027
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 replaces the 50% CGT discount for individuals, trusts and partnerships with cost base indexation for gains accruing from 1 July 2027, together with a 30% minimum tax on real capital gains for assets held at least 12 months. Gains accrued up to 1 July 2027 keep the 50% discount, using a market valuation at that date. The Government has said the four small business CGT concessions remain in place, and is consulting on how indexation will apply to small and start-up businesses with a low or nil cost base, which will be dealt with in later legislation.
In practical terms:
- Owners planning to sell in the next few years should get a market valuation of the business and its premises at 1 July 2027, because it will separate the gain that keeps the 50% discount from the gain taxed under the new rules
- The 15-year exemption and retirement exemption become relatively more valuable, because they remove gain entirely rather than discount it
- Companies were never entitled to the 50% discount, so their position changes less, but the concessions still matter when owners sell shares
- Rules for the low cost base consultation are not yet law. Do not assume how goodwill built from nil will be treated after 2027
Common mistakes
- Assuming a property leased to an unrelated tenant is an active asset
- Forgetting to include connected entities and affiliates in the $6 million test
- Missing the retirement exemption election, which must be documented, or failing to contribute to super in time when under 55
- Not planning which entity holds the business and premises well before a sale
- Selling a business without a valuation of goodwill, leaving the gain open to challenge
Frequently asked questions
Can the concessions apply to the sale of shares in my company?
Yes, if extra conditions are met, including the company passing the 80% active asset test and you being a significant individual or CGT concession stakeholder.
Do I have to retire to use the retirement exemption?
No. Despite the name, there is no requirement to retire. If you are under 55, the amount must go into super.
Should I sell before 1 July 2027?
Not necessarily. Gains accrued before that date keep the 50% discount either way. The right timing depends on the business, valuations and your other plans, so get advice before signing a contract.
Business sale tax advice in Melbourne’s west
Kennedy Tax & Business Services advises business owners on structuring and timing a sale, applying the small business CGT concessions and contributing proceeds to super. See our capital gains tax advice, contribution caps guide and SMSF accounting, or contact us.
This article is general information only and does not take into account your circumstances. Parts of the 2027 CGT changes depend on regulations and further legislation not yet made. Speak to a registered tax agent before acting.
