How the Small Business CGT Concessions Work
How it works
Division 152 of the ITAA 1997 provides four concessions that can substantially reduce or eliminate the capital gain when you sell an active business asset. They are designed to help small business owners who have built value in their business over years of work — particularly those approaching retirement.
Before any concession can apply, you must pass the basic conditions: either the $2 million aggregated turnover test or the $6 million maximum net asset value (MNAV) test, and the asset must be an active asset (used in the course of carrying on a business). You only need to satisfy one of the two threshold tests. The MNAV test counts the net value of CGT assets owned by you, your connected entities, and your affiliates — it does not include personal-use assets, the family home, or superannuation.
The four concessions are applied in a specific statutory order: (1) the 15-year exemption, (2) the 50% active asset reduction, (3) the retirement exemption, and (4) the small business rollover. This calculator walks you through each step in sequence, showing exactly how much each concession removes from your gain and what remains assessable. The concessions can stack — an individual who qualifies for both the CGT discount and the active asset reduction can reduce their gain by 75% before the retirement exemption or rollover is even considered.
When to use this calculator
- You are selling or disposing of a business asset (goodwill, business premises, plant and equipment, shares in a small business company, or units in a small business trust)
- You want to check whether you pass the $2 million turnover test or the $6 million MNAV test
- You are retiring and want to see how much of the gain can be directed into super via the retirement exemption
- You have owned the asset for 15+ years and want to check if the entire gain can be disregarded
- You plan to acquire a replacement business asset within 2 years and want to understand the rollover option
Key concepts
- 15-year exemption
- The most generous concession — it disregards the entire capital gain if you continuously owned the asset for at least 15 years and you are aged 55 or over and retiring (or are permanently incapacitated). If it applies, no other concession is needed. The exempt proceeds paid to an individual over 55 can be contributed to super as a non-concessional contribution without counting toward the non-concessional cap.
- 50% active asset reduction
- Reduces the remaining capital gain (after losses and the general CGT discount) by a further 50%. This is separate from the general 50% CGT discount — an individual can receive both, reducing the gain to 25% of the original amount. Companies are not eligible for the general CGT discount but can still claim the active asset reduction.
- Retirement exemption
- Allows you to disregard up to $500,000 of capital gains over your lifetime from small business asset disposals. The $500,000 is a cumulative lifetime cap across all CGT events where you claim this exemption. If you are under 55, the exempt amount must be contributed to a complying superannuation fund.
- Small business rollover
- Defers (does not eliminate) the remaining capital gain if you acquire a replacement active asset or improve an existing one within 2 years after the CGT event. The deferred gain becomes assessable if no replacement is acquired within the required period, or when the replacement asset is later disposed of.
Worked example — selling a business and applying the concession waterfall
Raj, an individual aged 58, sells the goodwill of his consulting business for $600,000. He originally established the business 8 years ago, so the cost base of the goodwill is nil. His aggregated turnover is $1.4 million (below the $2 million threshold), and the net value of his CGT assets is $3.8 million (below the $6 million MNAV threshold). He passes the basic conditions.
Because he has only owned the business for 8 years (not 15), the 15-year exemption does not apply. The concessions are applied in order:
| Step | Concession | Calculation | Remaining gain |
|---|---|---|---|
| Capital gain | — | $600,000 − $0 cost base | $600,000 |
| General CGT discount (50%) | Held > 12 months, individual | $600,000 × 50% | $300,000 |
| Active asset reduction (50%) | Division 152-C | $300,000 × 50% | $150,000 |
| Retirement exemption | Division 152-D, lifetime cap $500,000 | $150,000 (within cap) | $0 |
Raj's assessable capital gain is $0. The $150,000 retirement exemption amount is contributed to his super fund. He has used $150,000 of his $500,000 lifetime retirement exemption cap, leaving $350,000 available for future CGT events. Without the small business concessions, Raj would have included $300,000 (after the CGT discount) in his taxable income — resulting in approximately $117,000 in CGT at the top marginal rate.