What Tax and CGT Issues Should I Think About Before Selling My Business?

Selling a business is generally a CGT event, meaning the gain on sale may be taxable. However, Australia has a specific set of small business CGT concessions that can significantly reduce, or in some cases entirely eliminate, that tax — provided you meet the eligibility conditions. Understanding which concessions might apply, and planning for them, needs to happen well before the sale is finalised, not after.

These can potentially be combined — for example, the 50% active asset reduction alongside the retirement exemption — but eligibility for the 15-year exemption is tested first; if you qualify for it, the entire gain is disregarded and the other concessions aren't needed.

Each concession carries its own detailed conditions beyond the brief summary above — the sections below explain the most important of these in plain English, but this remains a simplified overview, not a substitute for a proper assessment of your specific situation.

For an individual, this exemption generally requires continuous ownership of the asset for the 15 years ending just before the sale, and that the individual is 55 or over with the sale connected to their retirement, or permanently incapacitated. For a company or trust, the conditions are more involved — the entity generally needs a “significant individual” (broadly, someone with at least a 20% interest) who themselves meets the age and retirement conditions, among other requirements. This is an area worth confirming carefully for company and trust structures specifically, rather than assuming the individual test applies in the same way.

Rather than simply “reinvesting proceeds within two years,” the rollover works by deferring an eligible capital gain, provided you acquire a replacement active asset, or make a capital improvement to an existing one, within what's called the replacement asset period. That period generally starts one year before, and ends two years after, the CGT event — with the ATO able to allow a longer period in some circumstances. If the replacement conditions aren't ultimately satisfied, the deferred gain can become assessable at the end of that period, so this concession genuinely defers tax rather than eliminating it, and needs to be tracked carefully through to the end of the replacement period.

Before any specific concession applies, you generally need to meet a set of basic conditions — but the headline turnover and net asset thresholds are only part of that picture, not a complete eligibility test on their own. Broadly, eligibility can depend on:

• the specific CGT event and the capital gain that resulted from it;

• whether the asset passes the active asset test — genuinely used in running the business, not just held passively;

• which small business eligibility pathway applies — commonly an aggregated turnover under $2 million, or a net asset value test of $6 million, though eligibility can be assessed differently depending on the concession and the structure involved;

• the type of asset being sold, including whether shares in a company or an interest in a trust are involved, which brings additional tests into play; and

• whether the claimant is an individual, company, trust or partner, since the specific conditions can differ by entity type.

Additional conditions apply, and the headline thresholds should not be treated as a complete eligibility test — a proper assessment needs to work through the specific conditions relevant to your business structure and the asset being sold.

Some concessions depend on age and retirement circumstances, others on how long you've owned the asset, and others on what you do with the proceeds afterward. A sale structured or timed without this in mind can miss out on concessions that would otherwise have applied — which is exactly why this needs to be part of the planning conversation before a sale, not a calculation done afterward when the options have already narrowed.

A business owner, aged 58, sells a business she's owned for 18 years, as part of retiring. Because she meets the age, retirement and 15-year ownership conditions, the 15-year exemption may allow her to disregard the entire capital gain — a materially different outcome than if she'd sold at 50, or after only 10 years of ownership, where different concessions, with different limits, would need to be considered instead.

Because several of these concessions depend on ownership length or age, understanding which ones you're likely to qualify for — and when — is valuable information well before you're actively negotiating a sale. This is one of several reasons succession and exit planning benefits from starting years in advance, covered in its own dedicated guide, rather than only being considered once a buyer is already at the table.

As at the date of this guide, the current thresholds described above — broadly, the $2 million aggregated turnover test or $6 million net asset value test — apply now, and continue to apply to a sale completed today. Separately, the Government has already legislated (though not yet commenced) a change taking effect from 1 July 2027: the turnover threshold specifically for the 50% active asset reduction will increase from $2 million to $10 million, extending that particular concession to considerably more businesses. The other three concessions — the 15-year exemption, the retirement exemption and the small business rollover — are set to retain the existing $2 million/$6 million tests.

A broader, separate reform also already legislated will change how the general 50% CGT discount applies to individuals, trusts and partnerships on gains accruing from 1 July 2027, replacing it with cost base indexation and a minimum tax rate on real gains. Importantly, this broader change does not remove or reduce the four small business CGT concessions described in this guide — they continue to operate as their own dedicated relief, alongside the broader reform, rather than being replaced by it.

If your sale is likely to occur on or after 1 July 2027, it's worth confirming the settings that will actually be in force at that time, rather than relying solely on the rules current today.

• Do I know whether my business would meet the basic small business CGT concession eligibility conditions — including the active asset test, not just the turnover or net asset thresholds?

• How long have I owned the business or the specific assets I'm planning to sell?

• Am I approaching an age or circumstance where the retirement or 15-year exemptions might apply — and if I operate through a company or trust, do I know who my significant individual is?

• If my sale might happen on or after 1 July 2027, have I checked which settings will actually apply at that time?

• Have I started this conversation well before an actual sale is imminent, while there's still time to plan around it?

The ATO sets out the small business CGT concessions and their eligibility conditions in detail.

ato.gov.au — Small business CGT concessions https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/incentives-and-concessions/small-business-cgt-concessions

• you're planning to sell your business, even if not imminently, and want to understand which CGT concessions you're likely to qualify for;

• you're structuring a sale and want the timing and terms optimised around available concessions;

• you want to understand how the retirement exemption interacts with your superannuation planning; or

• you're unsure whether your business or specific assets meet the eligibility conditions.

→ How Is a Small Business Valued — and What Actually Makes It More Valuable?

→ How Do I Prepare My Business for Sale or Succession Years Before I Want to Leave?

→ Why Is My Taxable Profit Different From the Profit in My Accounts?

SKC Accounting | Knowledge Centre | Knowledge Guide 099

Last reviewed: August 2026

General information only. This guide does not take into account your individual circumstances and is not a substitute for professional accounting, taxation, legal or financial advice.