What Are the Small Business CGT Concessions?

There are 4 of them, they all sit in Division 152 of the ITAA 1997, and from the 2027-28 income year they stop sharing one entry test.

That last part is new. The 50% active asset reduction moves to a $10 million aggregated turnover threshold. The 15 year exemption, the retirement exemption and the rollover stay on $2 million turnover or $6 million net assets. Anyone still teaching these four as a single gate will get 2027-28 wrong.

The basic conditions

Subdivision 152-A. Everything starts here, and you need all of it before any concession is even on the table.

A CGT event happens to a CGT asset you own, and it would otherwise produce a gain.

You are a CGT small business entity, meaning aggregated turnover under $2 million. Or you pass the maximum net asset value test, meaning the net value of CGT assets held by you, your connected entities and your affiliates is $6 million or less just before the CGT event. Or you are a partner in a partnership that is a small business entity. Or you do not carry on a business yourself and the asset is used in the business of an affiliate or a connected entity.

The asset passes the active asset test.

Both dollar figures are fixed. Neither is indexed. They have sat at $2 million and $6 million since 2007, which is why plenty of businesses that feel small on any ordinary measure fall out of the concessions entirely.

The active asset test

An active asset is one used, or held ready for use, in a business carried on by you, your affiliate, or an entity connected with you. It can be tangible or intangible, so goodwill counts.

The asset has to have been active for at least half the test period if you owned it for 15 years or less, or at least 7.5 years if you owned it for more than 15 years. The active periods do not have to be continuous, and the asset does not have to be active on the day you sell.

The test period runs from acquisition to the earlier of the CGT event and the day the business ceased or was sold, where the CGT event falls within 12 months after that.

Assets used mainly to derive rent, interest or royalties are generally excluded. A commercial property leased to third parties usually fails. The same property used in your own trading business usually passes, which is one of the sharper edges in property CGT.

The four concessions

15 year exemption, Subdivision 152-B. The whole gain is disregarded. You need continuous ownership for at least 15 years, a significant individual for periods totalling at least 15 years of that ownership, and an individual aged 55 or over with the event happening in connection with retirement, or who is permanently incapacitated.

50% active asset reduction, Subdivision 152-C. Halves whatever gain is left. No conditions beyond the basic ones, which makes it the default outcome for most eligible sales.

Retirement exemption, Subdivision 152-D. Up to $500,000 of gains disregarded, as a lifetime limit for each individual. Under 55, the amount has to go into a complying super fund or retirement savings account. From 55, the cash can stay in your hands.

Rollover, Subdivision 152-E. Defers the gain if you acquire a replacement active asset or make a capital improvement to an existing one, generally within a period running from 1 year before to 2 years after the CGT event.

The order changes the answer

Capital losses first. Then the general 50% CGT discount, if you held the asset more than 12 months and you are an individual or a trust. Then the 50% active asset reduction. Then the retirement exemption or the rollover on whatever remains.

The 15 year exemption skips the queue. Where it applies the gain disappears and nothing else needs considering.

One deliberate move worth knowing: you can choose not to apply the 50% active asset reduction. Skipping it leaves a larger gain to run through the retirement exemption, which pushes more money into super under the lifetime CGT cap. That cap is $1,935,000 for 2026-27 and it sits outside the non concessional contributions cap.

Shares and units carry extra conditions

Selling shares in your operating company runs a different test from selling the company’s assets, and the difference shows up late. This is one of the places where the structure you chose years ago decides the tax outcome at exit.

You have to be a CGT concession stakeholder in the company or trust. That means a significant individual with a small business participation percentage of at least 20%, or the spouse of one with participation above zero. Where an entity is interposed, the 90% test applies instead.

The entity also has to pass the 80% test. At least 80% of the market value of its assets must be active assets, plus cash and financial instruments inherently connected with the business.

The 80% test is where most share sales fall over. Accumulated retained cash. An investment property bought inside the trading company. A share portfolio sitting on the balance sheet. Any of those can drag the ratio under 80% on the one day it matters.

What changes from 2027-28

Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026 as Act No. 49. It is law.

From 1 July 2027 the general 50% CGT discount is replaced by cost base indexation plus a 30% minimum tax on assessable gains, with the discount retained for new residential dwellings. Until 30 June 2027 the general 50% discount runs exactly as it always has.

Senate amendments lifted the aggregated turnover threshold for the 50% active asset reduction from $2 million to $10 million, effective from the income year that includes 1 July 2027, in s 152-205(2). The stated aim was to line it up with the instant asset write off threshold.

All 4 concessions survive. Only one of them gets the new threshold.

What they do not fix

Stamp duty. State based, untouched by Division 152, and on an asset sale it can dwarf the income tax saving.

GST. Selling a business as a going concern may be GST free under its own conditions, and those conditions have nothing to do with Division 152.

Depreciating assets and trading stock. Balancing adjustments and stock on hand are ordinary income. Division 152 works on capital gains only.

Division 7A. A shareholder loan account is not an active asset and does not get cleaned up by a sale.

Part IVA. Rearranging a transaction mainly to manufacture eligibility stays open to challenge, which is the same warning that attaches to the small business restructure rollover.

Where this bites in practice

Most of the failures we see are structural rather than arithmetic. The wrong entity holds the asset. The trading company accumulated cash for a decade and quietly broke the 80% test. Nobody checked whether the sole trader or company decision made 15 years ago left a significant individual in place.

None of that is fixable in the week before contracts are signed. If a sale is anywhere on the horizon, the eligibility position is worth mapping now. Tax Assistant can pull the turnover and asset numbers you need for the basic conditions test.

Technical reference

Small business CGT concessions: Division 152, Income Tax Assessment Act 1997. Four concessions: 15 year exemption (Subdivision 152-B), 50% active asset reduction (Subdivision 152-C), retirement exemption (Subdivision 152-D), rollover (Subdivision 152-E).

Basic conditions: Subdivision 152-A. A CGT event happens in relation to a CGT asset in the income year; the event would have resulted in a gain; the taxpayer is a CGT small business entity, satisfies the maximum net asset value test, is a partner in a partnership that is a small business entity, or holds an asset used in the business of an affiliate or connected entity; the asset satisfies the active asset test.

CGT small business entity: aggregated turnover less than $2 million. Aggregated turnover: Subdivision 328-C. Maximum net asset value test: net value of CGT assets of the taxpayer, connected entities and affiliates not exceeding $6 million just before the CGT event. Both amounts are fixed and unindexed and have applied since 2007.

Active asset test, s 152-35: active for at least half the test period where the asset was owned for 15 years or less, or at least 7.5 years where owned for more than 15 years. The test period begins on acquisition and ends at the earlier of the CGT event and the cessation or sale of the business where the CGT event occurs 12 months or less after that. Assets whose main use is to derive rent, interest, royalties or foreign exchange gains are generally excluded.

Additional conditions for shares in a company or interests in a trust: the taxpayer must be a CGT concession stakeholder, being a significant individual with a small business participation percentage of at least 20% or the spouse of a significant individual with a participation percentage above zero. Where an entity is interposed, CGT concession stakeholders must have a total small business participation percentage of at least 90% in that entity. The shares or interests must satisfy the modified active asset test, under which at least 80% of the market value of the entity’s assets are active assets, cash or financial instruments inherently connected with the business.

15 year exemption: continuous ownership for at least 15 years; a significant individual for periods totalling at least 15 years of the ownership period; a significant individual aged 55 or over at the time of the CGT event where the event happens in connection with retirement, or permanently incapacitated.

Retirement exemption: lifetime limit of $500,000 for each individual. Where the individual is under 55, the exempt amount must be contributed to a complying superannuation fund or retirement savings account.

Lifetime CGT cap for superannuation contributions: $1,935,000 for 2026-27. Indexed annually to AWOTE in $5,000 increments. Contributions under the CGT cap do not count towards the non concessional contributions cap.

Order of application: capital losses, then the general 50% CGT discount under Division 115 where applicable, then the 50% active asset reduction, then the retirement exemption or the small business rollover. The 15 year exemption applies before all other concessions and, where available, disregards the entire gain.

Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49): Royal Assent 26 June 2026. From 1 July 2027 the general 50% CGT discount is replaced by cost base indexation and a 30% minimum tax on assessable gains, with the 50% discount retained for new residential dwellings. Assets held on 30 June 2027 are subject to a deemed disposal and reacquisition on 1 July 2027. All 4 small business CGT concessions are retained. From the income year that includes 1 July 2027 the aggregated turnover threshold for the 50% active asset reduction rises from $2 million to $10 million, s 152-205(2). The 15 year exemption, retirement exemption and rollover keep the $2 million turnover and $6 million net asset tests.

Not addressed by Division 152: state stamp duty; GST, including the going concern provisions in Subdivision 38-J of the GST Act; balancing adjustments on depreciating assets under Division 40; trading stock; Division 7A shareholder loan accounts; Part IVA of the Income Tax Assessment Act 1936.

This article is general information and is not tax advice for any particular transaction. Current as at July 2026.