Small Business CGT Relief

Thinking of selling your business or a business use asset? Then this could be important to you!

Capital gain tax applies to the capital gain made on the disposal of certain assets, except for some specific exemptions or concessions. The main exemption includes the principal place of residence. The other common concession is the 50% general discount which allows individuals to reduce the gross capital gain by 50% (provided the asset has been held for a minimum of 12 months). In addition to these outlined CGT reliefs, there are also four small business concessions available to those taxpayers that meet the eligibility criteria. The main eligibility condition is that the entity or individual must be a small business entity (an entity whose turnover does not exceed $2 million) or the entity holds less than $6 million in CGT assets.



If the eligibility criteria is satisfied, the eligible taxpayer has the ability to utilise any of the below four mentioned concessions:

1.Small business 15 year CGT asset exemption

If you (or your company/trust) have owned the business, or an asset of the business for at least 15 years and you are aged at least 55 and are planning on retiring or are permanently incapacitated, the entire capital gain can be disregarded under this exemption. Once this exemption is applied, the entire gain is disregarded and no further concessions need to be applied.

2.Small business 50% reduction

If the 15 year exemption does not apply, then the net capital gain remaining (after applying the general 50% exemption) may be reduced by a further 50 per cent. This concession is optional and is not required to be applied.

3.Small business retirement exemption

The remaining capital gain (after the general and 50% reduction applied) can be eliminated by applying the CGT retirement exemption. In order to utilise this exemption, the proceeds from the sale of the business/asset must be used in connection with retirement. If you are under the age of 55, the proceeds must be contributed into a complying superfund. If you are over the age of 55, there is no requirement to contribute the proceeds into super, you just elect to disregard the capital gain. There is a lifetime limit of $500,000 per person available under this concession.

4.Small business rollover relief

If a replacement asset is purchased within two years of the asset disposal, you may be eligible to defer the capital gain until the replacement asset is subsequently disposed.

It is recommended you speak with Initiative before selling your business or a business use asset in order to discuss if any of the above mentioned concessions can apply to you in order to remove or reduce any of the potential capital gains that may arise. 

Kristina Brown – Accountant