How does the small business 15-year exemption work?

If you've continuously owned an active asset for at least 15 years and you're 55 or older and the sale is in connection with your retirement — or you're permanently incapacitated — the whole capital gain is disregarded. You don't apply any other concession. Companies and trusts can use it if they had a significant individual for 15 years who meets the age or incapacity test.

What is the lifetime limit on the small business retirement exemption?

The retirement exemption lets you disregard up to A$500,000 of capital gains over your lifetime. If you're under 55 when you choose it, you must pay the exempt amount into a complying super fund or retirement savings account. You don't have to actually retire, and you must keep a written record of the amount you choose.

Are the small business CGT concessions changing in 2027?

The four concessions are kept. Under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, from the income year that includes 1 July 2027 the $2 million turnover test no longer applies to the 50% active asset reduction, so businesses under the A$10 million small business entity limit can use it. The general 50% CGT discount is replaced by indexation for gains accruing from 1 July 2027.

Can I put the proceeds into super?

Yes. Amounts from the 15-year exemption, and retirement exemption amounts, can be contributed to super and counted against the lifetime CGT cap of A$1,935,000 for 2026-27 instead of the non-concessional cap, if you lodge the CGT cap election form with your fund by the time you contribute.

Income tax

Small Business CGT Concessions in 2026: Eligibility, the Four Concessions and Worked Examples

Small business CGT concessions 2026: A$2m turnover and A$6m asset tests, 15-year exemption, 50% reduction, A$500k retirement exemption, roll-over, 2027 changes.

Edited by Sumeet YadavFounder & editor, MSMETOOLS · fact-checked against official sources

Updated October 2026 Verified against official sources 9 October 2026 17 min read

Small business CGT concessions in Australia — MSMETOOLS guide cover

Contents (9)

1. What the concessions are for
2. The basic conditions
3. Concession 1: the 15-year exemption
4. Concession 2: the 50% active asset reduction
5. Concession 3: the retirement exemption
6. Concession 4: the small business roll-over
7. Worked examples in A$
8. Common mistakes and how they get fixed
9. What to do next

Selling a business, a farm or the building your business trades from is usually the largest capital gain an owner ever makes — and for many small businesses the tax on it can be cut to zero. This guide is for Australian sole traders, partners, and owners of family companies and trusts who are planning a sale, a retirement or a restructure. It explains the basic conditions that unlock the four small business CGT concessions, how each concession works, the order you apply them in, what the 2026 tax reform Act changes from 1 July 2027, and worked examples in Australian dollars.

Quick answer

The small business CGT concessions in Division 152 of the Income Tax Assessment Act 1997 can reduce, disregard or defer a capital gain on an active asset. To qualify you need aggregated turnover under A$2 million or net assets of no more than A$6 million, and the asset must pass the active asset test. Then four concessions are available: the 15-year exemption, the 50% active asset reduction, the retirement exemption (up to A$500,000 lifetime) and the roll-over.

15-year exemption: whole gain tax-free if owned 15+ years and you're 55+ and retiring, or permanently incapacitated
50% active asset reduction: halves the gain, on top of the general 50% discount for individuals and trusts
Retirement exemption: up to A$500,000 per person; must go to super if you're under 55
Roll-over: defer the gain if you buy a replacement active asset within 2 years
From 2027-28 the 50% reduction opens to businesses under the A$10 million turnover limit

What the concessions are for

Capital gains tax applies when you sell, give away or otherwise dispose of a CGT asset — goodwill, business premises, shares in your company, units in your trading trust or farmland. Without concessions, an individual who has held the asset for more than 12 months generally pays tax on half the gain at their marginal rate, a company pays tax on the full gain, and a family trust passes the gain to beneficiaries.

The small business concessions exist because a small business owner's business is often their retirement savings. The rules let a genuine small business reduce the taxable gain in stages and, in many cases, eliminate it, provided the asset was used in the business rather than held as an investment. The concessions can be combined, and they apply to individuals, partnerships, companies and trusts — although companies don't get the general 50% CGT discount.

There are four concessions, and they're applied in a set order:

The order the concessions are applied

Step 1

15-year exemption

if it applies, stop — gain is nil

Step 2

Capital losses

offset current and prior-year losses

Step 3

50% CGT discount

individuals and trusts, held 12+ months

Step 4

50% active asset reduction

automatic unless you opt out

Step 5

Retirement exemption and/or roll-over

for what remains

The basic conditions

Every concession starts with the same basic conditions in section 152-10. All of them must be met just before the CGT event — usually the date of the sale contract.

Step 1: you must be an eligible entity

You meet this step if any one of these applies:

you're a CGT small business entity: you carry on a business and your aggregated turnover is less than A$2 million;
you pass the maximum net asset value (MNAV) test: the net value of the CGT assets you, your affiliates and entities connected with you own is no more than A$6 million;
you don't carry on a business yourself, but the asset is used in a business run by your affiliate or an entity connected with you, and that business is a CGT small business entity (the passively-held asset rule); or
you're a partner in a partnership that is a CGT small business entity and the asset is a partnership asset or one you own that the partnership uses.

Aggregated turnover includes the turnover of your affiliates and of entities connected with you — generally those you or they control at 40% or more. A business owner with a A$1.5 million trading company and a separate A$800,000 business through a trust they control has aggregated turnover of A$2.3 million and fails the turnover test, so they would need to rely on the MNAV test.

The MNAV test counts the market value of all CGT assets less related liabilities, plus provisions for annual leave, long service leave, unearned income and tax. You exclude assets used solely for personal use and enjoyment, your home (except any business-use portion), your super, and interests in connected entities (whose own assets are counted instead). Many owners who are over the turnover limit pass here — but family property portfolios held through connected entities often push the total over A$6 million.

Flowering canola crop on farmland near Binalong, New South Wales — Farmland used in a farming business is a classic active asset, and retiring farmers often rely on the 15-year exemption when they sell.· Image: jemasmith (CC BY 2.0)

Step 2: the asset must be an active asset

An active asset is one you, your affiliate or a connected entity use — or hold ready for use — in carrying on a business, or an intangible asset such as goodwill inherently connected with the business. It must have been active for at least half the period you owned it or, if you owned it for more than 15 years, for at least 7.5 years. The active period doesn't have to be just before the sale: a shop used in the business for eight of its ten years of ownership passes even if it was leased out at the end.

Some assets can't be active assets. The main one for small businesses is an asset whose main use is to derive rent. A commercial property leased to an unrelated tenant fails, even though the tenant runs a business in it. But a property owned by you personally and used by your own trading company passes, because use by a connected entity counts as your use. Short-stay properties where guests get exclusive possession and few services usually fail; a motel with rooms, cleaning and reception generally passes.

Basic conditions check before a sale

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Step 3: extra conditions for shares and trust interests

If you're selling shares in a company or units or an interest in a trust, rather than the business assets themselves, two extra tests apply. The company or trust must pass the 80% test — active assets, plus cash and financial instruments inherently connected with the business, must make up at least 80% of the market value of all its assets. And you must be a CGT concession stakeholder (a significant individual with at least a 20% interest, or their spouse), or the stakeholders in the entity must together hold at least 90%. These conditions are where many share sales fail, often because the company has built up surplus cash or investments.

Depreciating assets are excluded

Plant, equipment and vehicles are depreciating assets. A gain on their sale is mostly dealt with as a balancing adjustment in your ordinary income — see our instant asset write-off guide for the small business depreciation rules — and the small business CGT concessions don't apply to them.

Concession 1: the 15-year exemption

The 15-year exemption is the most generous concession: the whole capital gain is disregarded and you don't apply any other concession. You qualify if, in addition to the basic conditions:

you continuously owned the asset for at least 15 years; and
you're 55 or older and the CGT event happens in connection with your retirement, or you're permanently incapacitated.

"In connection with retirement" doesn't mean you must stop working entirely. A significant reduction in hours or a change in role can be enough, but you need to be able to show the sale is part of a retirement plan. For a company or trust, the entity must have owned the asset for 15 years, had a significant individual for a total of at least 15 years, and an individual who was a significant individual just before the event must be 55-plus and retiring, or permanently incapacitated.

You can contribute the capital proceeds from a 15-year exemption sale to super and count them against your lifetime CGT cap, which is A$1,935,000 for 2026-27, instead of the non-concessional cap. You must give your fund the CGT cap election form no later than when you make the contribution.

Key small business CGT figures for 2026-27

A$2 million

Turnover limit

CGT small business entity

A$6 million

Net asset limit

Maximum net asset value test

A$500,000

Retirement exemption

Lifetime, per individual

A$1,935,000

CGT cap for super

Lifetime, 2026-27

2 years

Roll-over window

After the CGT event

Concession 2: the 50% active asset reduction

If you meet the basic conditions, the 50% active asset reduction applies automatically — you don't have to elect it — and halves whatever capital gain remains after capital losses and the general CGT discount. For an individual or trust who has held the asset for more than 12 months, the two 50% reductions together leave just 25% of the gain. A company gets only the active asset reduction, so it is left with 50%.

You can choose not to apply it. That is sometimes better when you plan to use the retirement exemption or roll-over and want to preserve a larger amount for them — for example, a company that wants to roll over the full gain into a replacement asset. Because the reduction applies only if the basic conditions are met, there are no extra conditions to satisfy.

The 2027 change

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which received assent on 26 June 2026, changes how the 50% active asset reduction works. For assessments for the income year that includes 1 July 2027 and later years, the A$2 million threshold for being a CGT small business entity is disregarded when working out whether the basic conditions are met for this concession. In practice, a business with aggregated turnover under the general small business entity limit of A$10 million will be able to use the 50% reduction, even if it fails the A$6 million net asset test. The other three concessions keep the existing turnover and net asset limits.

The same Act replaces the general 50% CGT discount with cost base indexation for gains accruing from 1 July 2027 and introduces a minimum 30% rate of tax on certain capital gains of resident individuals. Assets held before 1 July 2027 are dealt with by transitional rules that split the gain at that date. The ATO had not published detailed guidance on how these rules interact with the small business concessions when this page was verified, so a sale settling after 30 June 2027 needs specific advice.

Workers and machinery inside a timber joinery workshop in Esk, Queensland, in 1916 — Business premises and goodwill can be active assets; depreciating assets such as machinery are taxed through balancing adjustments instead.· Image: Aussie~mobs (Public Domain Mark 1.0)

Concession 3: the retirement exemption

The retirement exemption lets you disregard up to A$500,000 of capital gains from active assets over your lifetime. Despite the name, you don't have to retire. You choose the amount, and you must keep a written record of it. A company or trust can use the exemption for each of its CGT concession stakeholders, with each stakeholder's share counting against their own lifetime limit; the entity must then pay the exempt amount to or for the stakeholders within seven days of choosing (or of receiving proceeds, if later).

If you — or the stakeholder, for a company or trust — are under 55 when you make the choice, the exempt amount must be contributed to a complying super fund or retirement savings account. Lodge the CGT cap election form with the fund by the time you contribute so it counts against the CGT cap rather than your non-concessional cap. If you're 55 or older, there's no requirement to contribute, although you can still choose to.

The A$500,000 limit isn't indexed and is shared across all your sales over your lifetime. Once you've used it, it's gone — so it's worth planning which gains to apply it to, particularly if you expect more than one sale.

Concession 4: the small business roll-over

The roll-over defers all or part of a capital gain if you acquire a replacement active asset or make capital improvements to an existing active asset. The replacement asset period starts one year before the CGT event and ends 2 years after it (later in some earn-out cases). You can choose the roll-over before you have bought the replacement asset.

The deferred gain doesn't disappear. If you don't buy a replacement or improve an asset in time, CGT event J5 brings the gain back into tax at the end of the period. If you spend less than the rolled-over amount, CGT event J6 taxes the shortfall. And if a replacement asset later stops being active or is sold, CGT event J2 happens. A further roll-over or the retirement exemption can then be used on that later gain, if you qualify.

The four concessions side by side

Concession	Extra conditions	Effect	Choose or automatic
15-year exemption	15 years' ownership; 55+ and retiring, or permanently incapacitated	Whole gain disregarded	Choose
50% active asset reduction	None beyond the basic conditions	Remaining gain halved	Automatic (can opt out)
Retirement exemption	Under 55: pay into super; written record	Up to A$500,000 lifetime disregarded	Choose
Roll-over	Replacement active asset or capital improvement in the window	Gain deferred	Choose

15-year exemption

Extra conditions: 15 years' ownership; 55+ and retiring, or permanently incapacitated
Effect: Whole gain disregarded
Choose or automatic: Choose

50% active asset reduction

Extra conditions: None beyond the basic conditions
Effect: Remaining gain halved
Choose or automatic: Automatic (can opt out)

Retirement exemption

Extra conditions: Under 55: pay into super; written record
Effect: Up to A$500,000 lifetime disregarded
Choose or automatic: Choose

Roll-over

Extra conditions: Replacement active asset or capital improvement in the window
Effect: Gain deferred
Choose or automatic: Choose

Worked examples in A$

Example 1: a plumber sells his business at 58

Mark, 58, has run a plumbing business as a sole trader for ten years with turnover of about A$1.4 million. In 2026-27 he sells the goodwill and the workshop he owns, making a total capital gain of A$800,000. He has no capital losses. He's owned the workshop for ten years, so the 15-year exemption isn't available.

Mark's gain, step by step

1
Basic conditions
Turnover A$1.4 million is under A$2 million; goodwill and the workshop were used in the business throughout — both active assets.
2
CGT discount
Held more than 12 months, so A$800,000 × 50% = A$400,000.
3
50% active asset reduction
A$400,000 × 50% = A$200,000.
4
Retirement exemption
Mark chooses to disregard A$200,000 and records it in writing. Because he's over 55 he doesn't have to put it into super.
5
Result
Taxable capital gain: nil. A$300,000 of his lifetime retirement limit remains.

Example 2: retiring after 20 years

Jenny, 62, has owned the building her café trades from for 20 years and has run the café for the whole period. She sells both on retiring and makes a capital gain of A$1.2 million. Because she meets the basic conditions, has owned the assets for more than 15 years and is over 55 and retiring, the 15-year exemption disregards the entire gain. She can also contribute the sale proceeds to super, up to the A$1,935,000 CGT cap, without using her non-concessional cap.

Example 3: a company upgrades its premises

Harbour Joinery Pty Ltd, with turnover of A$1.8 million, sells the factory it has used for nine years at a A$300,000 gain and buys a larger factory 14 months later. As a company it gets no general discount. The 50% active asset reduction brings the gain to A$150,000, and the company chooses the roll-over for the remaining A$150,000 because the new factory costs more than that. Nothing is taxable now; the deferred A$150,000 will come back if the new factory is sold or stops being used in the business, unless another concession applies then. Getting money from the company to its owners is a separate step with its own rules — see our company registration guide for how company structures work.

Planning timeline for a business sale

2–3 years before

Test turnover and net assets across the group; check active asset periods; tidy surplus cash

Before signing

Confirm the CGT event date (usually the contract date) and that all basic conditions are met just before it

By your tax return

Make choices for the 15-year exemption, retirement exemption or roll-over; keep written records

On contributing to super

Lodge the CGT cap election form no later than the contribution

Within 2 years of the sale

Acquire a replacement active asset if you chose the roll-over

From 1 July 2027

New indexation rules and the wider 50% active asset reduction apply

Common mistakes and how they get fixed

Forgetting connected entities. Owners often test only their trading entity's turnover and forget a second business or a property trust they control. Fix: list every affiliate and connected entity before relying on the A$2 million test, and value their assets for the A$6 million test.

Leasing to outsiders. A building leased to an unrelated tenant is mainly used to derive rent and isn't an active asset. Fix: check the active period over the whole ownership — the half or 7.5-year rule may still be met from earlier years of own use.

Cash build-up in the company. Large cash balances or investments can make a company fail the 80% test, ruling out concessions on a share sale. Fix: review the balance sheet well before a sale.

Missing the super paperwork. Under-55s using the retirement exemption must contribute, and everyone using the CGT cap must lodge the election form by the time of the contribution. Fix: prepare the form with your fund before transferring money.

Letting a roll-over lapse. If the replacement isn't bought within the window, the gain returns as CGT event J5. Fix: diarise the 2 years deadline, or plan to use the retirement exemption on the J5 gain if you're eligible.

Official links

What to do next

If a sale is two or three years away, start now: test turnover and net assets across your whole group, check whether each asset has been active long enough, and decide whether to sell assets or shares. Estimate what the business is worth with our valuation calculator, then take the numbers to a registered tax agent — especially if settlement could fall after 30 June 2027, when the new indexation rules start.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

You must be a CGT small business entity with aggregated turnover under A$2 million, or pass the maximum net asset value test of A$6 million, or qualify as a partner or as the owner of an asset used in an affiliate's or connected entity's small business. The asset must also pass the active asset test, and shares or trust interests need extra conditions.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1.Small business CGT concessions — eligibility overview — Australian Taxation Office · accessed 9 October 2026
2.Maximum net asset value test — Australian Taxation Office · accessed 9 October 2026
3.Active asset test — Australian Taxation Office · accessed 9 October 2026
4.Small business retirement exemption — Australian Taxation Office · accessed 9 October 2026
5.Small business roll-over — Australian Taxation Office · accessed 9 October 2026
6.Contributions caps — Australian Taxation Office · accessed 9 October 2026
7.Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (No. 49, 2026) — Federal Register of Legislation · accessed 9 October 2026
8.Tax reform implementation — small business and startups — The Treasury (Treasurer's office) · accessed 9 October 2026

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We provide tools, guides and information for general educational purposes only. Always refer to official government websites for the latest and most accurate information.