Article 7 - FABC Accounting

By FABC Accounting
Published On: December 9th, 2025

Keywords

small business CGT concessions selling a small business capital gains tax Australia 15-year CGT exemption business sale tax planning

Can Selling Your Small Business Be Tax-Free in Australia?

If you own a small business in Australia, you may eventually face the question: “When I sell my business one day, is there a way to legally reduce — or even eliminate — the capital gains tax?”

In many cases, the answer can be yes. The Australian Taxation Office (ATO) provides Small Business CGT Concessions that are specifically designed to help eligible business owners significantly reduce, or in some cases completely remove, capital gains tax when selling active business assets.

Who Is Eligible for Small Business CGT Concessions?

To access these concessions, you generally need to satisfy two key requirements:

The asset must be an active asset – that is, used in running your business, such as business premises, equipment or goodwill, rather than a purely passive investment asset.
You must meet one of the small business size tests, such as:
• Annual aggregated turnover of less than $2 million, or
• Net value of business assets (including connected entities) under $6 million.

The Four Main Small Business CGT Concessions

If you qualify, the small business CGT rules may give you access to one or more of the following tax concessions.

1. 15-Year Exemption
If you are aged 55 or over, and you sell an active business asset that you have owned continuously for at least 15 years as part of your retirement, the entire capital gain may be completely tax-free.

2. 50% Active Asset Reduction
In addition to the standard 50% CGT discount for individuals and trusts, you may be able to reduce the remaining gain by a further 50% under the active asset reduction. This can dramatically lower the taxable capital gain.

3. Retirement Exemption (Up to $500,000)
Each individual may be able to disregard up to $500,000 of capital gains over their lifetime under the retirement exemption.

If you are aged 55 or over, the exempt amount can often be taken directly.
If you are under 55, the exempt amount generally needs to be contributed to your superannuation fund.

4. CGT Rollover (Replacement Asset Rollover)
Instead of paying CGT immediately, you may defer the capital gain if you reinvest the sale proceeds into a replacement active asset or use them to improve an existing business asset. The tax is “rolled over” to a later event.

Why Early Planning Matters

Many business owners only learn about the small business CGT concessions when they are already in the process of selling — and by then, it may be too late to restructure or meet certain tests.

Without proper planning, you may miss out because:

The asset is not held in the right entity or structure.
The asset does not clearly meet the “active asset” test.
Timing, ownership period or retirement conditions are not properly satisfied.

Why Professional Advice Before Selling Is Critical

Before you sign a contract to sell your business, it is essential to understand:

Whether you and your business qualify for small business CGT concessions.
Which combination of concessions may apply to your situation.
How to structure the sale to minimise tax and avoid costly mistakes.

FABC Accounting (Shuangma Accounting) assists business owners with:

Small business CGT eligibility assessments
Pre-sale tax planning and exit strategy design
Optimising sale structure while remaining fully compliant with ATO requirements

If you are planning to sell your business — or want to plan ahead for an eventual exit — early advice can make the difference between a heavily taxed sale and a highly tax-effective outcome.