Sell a business asset for a decent gain and the tax bill can be brutal — a $400,000 gain stacked on a normal salary can easily cost $80,000 or more. But if the asset belonged to a small business, four of the most generous concessions in the tax code are waiting: one wipes the gain out entirely, one halves it on top of the ordinary 50% CGT discount, one shelters up to $500,000 for life, and one lets you defer the bill while you reinvest.
Quick answer: In 2026-27, eligible small business owners can claim four CGT concessions on active business assets: the 15-year exemption (disregards the entire gain — 15+ years owned, 55+ and retiring), the 50% active asset reduction (halves the remaining gain on top of the regular 50% discount), the retirement exemption (disregards gains up to a $500,000 lifetime limit; under-55s must contribute the exempt amount to super), and the rollover (defers the gain when you buy a replacement asset). First you must pass a size test (aggregated turnover under $2 million, or net assets of $6 million or less) and the active asset test.
Do you even qualify? The two entry gates
Before any concession can apply, two basic conditions must hold.
Gate 1: the size test (pass either one). Either your aggregated turnover — yours plus connected entities and affiliates — is under $2 million for the income year, or the maximum net asset value of CGT assets (yours, plus connected entities’ and affiliates’, at market value) is $6 million or less just before the sale. It’s a snapshot at the CGT event and includes all your assets — investment properties, share portfolios, the lot — except your main residence (up to a threshold), personal-use assets and your super interest.
Gate 2: the active asset test. The asset must have been an active asset — used, or held ready for use, in carrying on a business — for at least half of your ownership period; if you’ve owned it more than 15 years, just 7.5 years of active use is enough. The asset owners wrongly assume qualifies? A rental property. An asset held mainly to derive rent — your investment unit, or a commercial property you merely lease out to a third party — fails the test. Operate from the building and it’s active; merely collect rent and it’s not.
Special rule for shares and trust interests. Selling shares in your family company or units in the family trust? The concessions can still apply via the ATO’s “look-through” rule, but at least 80% of the company or trust’s assets by market value must themselves be active assets, and you must generally be a significant individual (around 20%+ ownership). See the ATO’s active asset test guidance for the detail, and our CGT on shares guide for how the concessions interact with share sales.
One more exclusion: depreciating assets don’t play. Plant, equipment and vehicles you claimed under the capital allowance rules produce their gain under the balancing-adjustment rules, not as a capital gain.
The four concessions, in plain English
1. The 15-year exemption: the golden one
This is the best tax outcome the ATO offers anyone: the entire capital gain is disregarded. You need all of:
- You have owned the active asset continuously for at least 15 years
- You are 55 or older and the sale is in connection with your retirement, or you are permanently incapacitated
- The asset was an active asset for the required period
“In connection with retirement” is broader than it sounds — winding down before retiring, or selling after you’ve retired, can still count. Settle any doubt before the contract date. There’s no lifetime limit, and you don’t have to stop working forever. If a company or trust owns the asset, a CGT concession stakeholder must meet these conditions.
The super bonus: proceeds eligible for the 15-year exemption can be contributed to super under the separate CGT cap (a much larger lifetime limit — indexed yearly, reported at $1,935,000 for 2026-27, so check the ATO for the current figure) instead of counting against your non-concessional cap. Give your fund a valid CGT cap election form when you contribute.
2. The 50% active asset reduction: the workhorse
If the 15-year exemption is out of reach, this is your next lever: it halves whatever capital gain remains after losses and the general CGT discount, and it applies automatically — no election needed. It stacks with the ordinary 50% CGT discount, so an asset held more than 12 months can be halved twice, leaving just 25% of the original gain before any further concessions.
A timing footnote: 2026-27 is the final year the general 50% CGT discount works the way it always has. From 1 July 2027, the general discount ends for investment assets — but the small business concessions survive the reform unchanged, and the active asset reduction’s turnover gate is set to rise from $2 million to $10 million from 2027-28. Rushing a business-asset sale before 30 June 2027 buys you nothing. More on this below.
3. The retirement exemption: $500,000 of tax-free lifetime room
This one lets you disregard a capital gain up to a lifetime limit of $500,000 per individual (each stakeholder in a company or trust gets their own limit). The limit is cumulative across all years and businesses, reduced by any amounts already disregarded — used $150,000 on your first sale and you have $350,000 left. Keep a written record of every amount you choose to disregard.
The age rule is the critical detail:
- Under 55 when you make the choice: the exempt amount must be contributed to a complying superannuation fund (or retirement savings account). Miss the contribution and you lose the exemption.
- 55 or over: no super contribution required — take it in cash.
And despite the name, you do not have to retire to use the retirement exemption. The contribution, where required, must be made by the later of the day you must lodge the tax return for the year of the CGT event, or 30 days after you receive the capital proceeds — and the CGT cap election form must be given to your fund when you contribute. With the election, the contribution counts against the CGT cap rather than your $130,000 non-concessional cap. See the ATO’s retirement exemption conditions for the full detail.
4. The rollover: defer, don’t eliminate
Selling one business to buy another? The rollover lets you defer all or part of the gain if you acquire a replacement active asset — or improve an existing one — in the window from one year before to two years after the sale. The gain isn’t forgiven; it crystallises when you sell the replacement asset or change its use. Think of it as an interest-free loan from the ATO that keeps your capital working mid-expansion. You can also combine it with the retirement exemption, applying each to different parts of the remaining gain.
The order you MUST apply them in
The ATO sets a mandatory order — each concession applies to what’s left after the last. That sequencing is why the retirement exemption stretches: you’re applying it to only 25% of the original gain, so your $500,000 lifetime limit goes four times further.
| Step | Action | Effect on a $400,000 gain (no losses, held 8 years) |
|---|---|---|
| 1 | Check the 15-year exemption first | Not eligible (8 years < 15) — move on |
| 2 | Apply capital losses (current year + carried forward) | None — gain stays $400,000 |
| 3 | Apply the general 50% CGT discount (held > 12 months) | $400,000 → $200,000 — see our 50% CGT discount guide |
| 4 | Apply the 50% active asset reduction | $200,000 → $100,000 |
| 5 | Apply the retirement exemption and/or rollover | $100,000 → $0 (or deferred) |
Worked example: the café sale that pays $0 tax
Priya is 47. For eight years she’s run her Melbourne café from premises she owns — building and goodwill are active assets, held well past 12 months, and her aggregated turnover is $800,000. In 2026-27 she sells: $1,600,000 sale price, $1,200,000 cost base → gross capital gain of $400,000. First time she’s used any concession.
Applying the order:
- 15-year exemption: no — owned 8 years, and she’s under 55.
- Capital losses: none.
- General 50% CGT discount (held > 12 months): $400,000 × 50% = $200,000.
- 50% active asset reduction (automatic): $200,000 × 50% = $100,000.
- Retirement exemption: she disregards the remaining $100,000. Under 55, so it must be contributed to her super fund by the deadline (the later of her return lodgment date or 30 days after receiving the proceeds). Within her unused $500,000 limit, and with the CGT cap election it sits under the CGT cap — not her non-concessional cap.
Result: taxable capital gain of $0. Her $100,000 is now in super, taxed at the 15% super rate instead of her marginal rate, and her retirement exemption limit still has $400,000 left for any future sale.
Without the concessions — with only the general 50% discount — the $200,000 taxable gain stacks on her $90,000 salary → $290,000 taxable income. Under the 2026-27 resident rates, that’s $96,370 in tax versus $17,520 on $90,000 alone: an extra $78,850 plus $4,000 Medicare levy. The concessions saved her roughly $83,000. Run your own figures through our free CGT calculator.
Worked example 2: the 15-year exemption in action
Greg is 61, a Brisbane plumber. Nineteen years ago he bought his workshop and built the business from scratch. He’s winding down and sells in 2026-27: $2,200,000 proceeds, $900,000 cost base → gain of $1,300,000. Nineteen years of continuous ownership, over 55, selling in connection with retirement, active asset, turnover under $2 million — the 15-year exemption disregards the entire $1.3 million. CGT of $0, remaining steps never touched. No super contribution required; he keeps the cash or contributes under the CGT cap with the proper election. Had he sold at 54, the retirement exemption would have been his path — with the exempt amount locked into super.
Common mistakes that blow up claims
1. Failing the active asset test. The ATO flags this constantly. A commercial property leased to an unrelated tenant is a passive investment, not an active asset — even if it’s your biggest asset. The test is about use, not labels.
2. Busting the $6 million test by accident. Your assets are aggregated with connected entities and affiliates — your partner’s business assets, your investment property and your shares all count. Check both doors before assuming you fail.
3. Missing the CGT cap election paperwork. The contribution alone isn’t enough — without the approved CGT cap election form given to your fund at contribution time, the money counts against your $130,000 non-concessional cap and you can face excess-contributions tax.
4. Contributing late. Under-55 retirement exemption amounts must reach the fund by the later of your return lodgment date and 30 days after receiving the proceeds. Bank transfers take days; leave no margin and you lose the exemption.
5. Thinking the rollover erases the gain. It defers it. When you later sell the replacement asset, the deferred gain comes back to life on top of any new gain. Plan for that future CGT event.
6. Assuming “retirement exemption” requires retiring. It doesn’t — no requirement to stop working. This misunderstanding alone has left the concession unused by owners who thought they didn’t qualify.
7. Claiming concessions on depreciating assets. If you claimed your ute, machinery or computers under the capital allowance system, their disposal gain arises under the balancing-adjustment rules — the concessions can’t apply.
Tips before you sign anything
- Time your exit around the two cliffs: age 55 and the 15-year mark. Selling at 54 with a 14-year hold can cost tens of thousands more than waiting. The 15-year exemption is worth planning a calendar around.
- Get valuations for connected entities early. The $6 million test is measured just before the CGT event — you need market values before the sale, not after.
- Keep a written record of every retirement-exemption choice. The $500,000 is a lifetime limit reduced by prior choices — the ATO expects you to track it.
- Don’t mix up business and investment assets on the 2027 reform. From 1 July 2027 the general 50% CGT discount changes for investment assets, but the small business concessions are carved out unchanged — confirm the current position on the ATO’s CGT concessions legal guidance before relying on dates.
- Model the sale twice. Once with the concessions, once without — the gap tells you exactly how much planning effort is worth. See our property CGT guide if a business premises sale is part of your exit.
Frequently asked questions
Can I use more than one concession on the same gain?
Yes — that’s the design. The ATO sets the order: discount and active asset reduction first, then the retirement exemption and/or rollover on what’s left. In Priya’s example, three concessions hit the same $400,000 gain to reach zero tax.
Do the concessions apply to shares in my company?
Yes, via the look-through rule — but only if at least 80% of the company’s assets by market value are themselves active assets, and you’re generally a significant individual (roughly 20%+ ownership). Get the company valued before the sale: the 80% test is measured just before the CGT event.
Do I actually have to retire to use the retirement exemption?
No — no requirement to retire or reduce your hours; it’s a label, not a lifestyle test. The 15-year exemption does require a genuine connection with retirement (or permanent incapacity).
My turnover is over $2 million. Am I locked out?
Not necessarily — the $6 million maximum net asset value test is the second door, and many businesses above $2 million turnover still pass it, especially capital-light services. (From 2027-28 the 50% active asset reduction alone is slated to open up to businesses with turnover up to $10 million.)
How do I know how much of my $500,000 limit I’ve used?
It’s lifetime and self-reported — reduced by every amount you’ve previously disregarded. The ATO doesn’t send you a balance; you keep the written records. Never used it? It’s the full $500,000.
Does the 2027 CGT reform kill these concessions?
No. The reform ending the general 50% CGT discount from 1 July 2027 targets investment assets; the four small business concessions were carved out and continue unchanged, with the active asset reduction’s turnover threshold even rising to $10 million from 2027-28.
The bottom line
Four concessions, a fixed order, two entry gates. Pass the size and active asset tests, check the 15-year exemption first; if it doesn’t apply, run the gain through losses, the 50% discount and the 50% active asset reduction, then kill what’s left with the retirement exemption or defer it with the rollover. A $400,000 gain can legally produce a $0 tax bill — but only if the paperwork (valuations before the sale, the CGT cap election, the written exemption records) is done right. Estimate your gain with our free CGT calculator, see how it stacks onto your salary with our income tax calculator, and get advice early — before the contract is signed.