What are the small business CGT concessions in Australia — 15-year exemption and 50% reduction explained

The small business CGT concessions are among the most generous tax concessions available to Australian business owners. If you qualify, you may be able to reduce or eliminate capital gains tax when you sell an active business asset, retire from your business, or dispose of shares in a small company.

Basic eligibility conditions: You must either have an aggregated annual turnover of less than A$2 million, or the net value of all CGT assets owned by you and related entities must be less than A$6 million. Additionally, the asset sold must be an 'active asset' (used or held ready for use in a business for at least half the period of ownership) and you must satisfy the 'active asset test'.

The four concessions:

• 15-year exemption: If you have held an active asset for at least 15 years and you are over 55 and retiring (or permanently incapacitated), the entire capital gain is exempt from CGT. This is the most powerful concession.

• 50% active asset reduction: You can reduce your capital gain by 50% simply for owning an active business asset. This is in addition to the general 50% CGT discount for assets held over 12 months — combined, an individual can reduce a capital gain by up to 75%.

• Retirement exemption: You can exclude up to a lifetime limit of A$500,000 in capital gains if you use the proceeds for retirement (deposited into super if you are under 55).

• Small business rollover: You can defer the capital gain for up to 2 years if you replace the asset with another active asset. This gives you time to reinvest without triggering an immediate tax bill.