Small Business CGT Concessions

Basic conditions (Subdivision 152-A)

All four concessions share common entry conditions in Subdivision 152-A. You must satisfy at least one of two alternative gateway tests, plus the active asset test. For shares in a company or interests in a trust, additional conditions around significant individuals (20%+ participation interest) and the 80% active asset test on underlying entity assets must also be met.

15-year exemption (Subdivision 152-B)

The 15-year exemption fully disregards the capital gain. It requires continuous ownership for at least 15 years, and the individual must be 55 or older with the CGT event occurring in connection with retirement, or be permanently incapacitated. For companies and trusts, there must have been a significant individual for at least 15 years, and the CGT event must be connected with retirement or permanent incapacity of that significant individual. Amounts arising under the 15-year exemption can be contributed to super under the CGT cap ($1,865,000 for 2025-26).

50% active asset reduction (Subdivision 152-C)

This concession disregards 50% of the capital gain on an active asset. It is available regardless of age, with no retirement or incapacity conditions. When combined with the general 50% CGT discount for individuals and trusts (assets held 12+ months), only 25% of the original nominal gain remains. The reduction is effectively automatic once the basic conditions are satisfied.

Retirement exemption (Subdivision 152-D)

The retirement exemption allows you to disregard up to $500,000 of capital gains over your lifetime. The cap is per individual, tracked cumulatively across all uses, and is not indexed. If you are under 55, the exempt amount must be contributed to a complying super fund. If 55 or older, the amount can be taken in cash, tax-free. For companies and trusts, payments must be made to CGT concession stakeholders.

Small business rollover (Subdivision 152-E)

The rollover defers all or part of a capital gain for up to two years after the CGT event, or longer if you acquire a replacement active asset or make capital improvements within that period. The deferred gain effectively reduces the cost base of the replacement or improved asset. The gain crystallises when the replacement asset is disposed of or stops being active, unless further concessions are available at that point.

Order of applying concessions

The order matters because it changes the size of the pool to which each subsequent concession is applied. Getting the sequence wrong can mean using more of your lifetime retirement cap than necessary, or missing super contribution opportunities under the CGT cap.

Worked example: stacking all four concessions

Tariq, a 48-year-old IT consultant in Perth, sells his consulting business for $1.5 million after 10 years. His cost base is $200,000. Net assets of the group are below $6 million.

ATO compliance focus and record-keeping

Small business CGT concessions are a known ATO audit focus area, particularly for larger transactions. The ATO may engage in pre-lodgement compliance reviews for high-value business sales. A strong evidence trail is critical: independent valuations, entity structure charts, board minutes, documentation of ownership periods, rollover acquisitions and improvements, and records tracking lifetime use of the retirement exemption and CGT cap contributions to super.

How the four concessions interact — a woven example

THE BASIC CONDITIONS (s 152-10) — pick one: CGT small business entity (aggregated turnover < $2m), OR the $6m maximum net asset value test (including connected entities and affiliates). Then the ACTIVE ASSET TEST (s 152-35, s 152-40) — the asset must have been an active asset for either 7.5 years if held 15 years or more, or half the ownership period if held under 15 years. Once both gates are open, four concessions can apply individually or in combination: (1) 15-year exemption (s 152-105) — full disregard of the gain. Requires age 55+ in connection with retirement, OR permanent incapacity. Strongest single concession — consumes the gain entirely when available. (2) 50% active asset reduction (s 152-205) — stacks on top of the 50% general discount (Div 115) for individuals, giving an effective 75% reduction of the eligible gain. Default — no further conditions once the basic + active asset tests pass. (3) Retirement exemption (s 152-305) — up to $500,000 lifetime per individual. Under 55 must contribute to super; 55+ no super contribution required. (4) Rollover (s 152-410) — defer the gain by acquiring a replacement active asset within 2 years (4 years for involuntary disposals). WORKED EXAMPLE (woven). Sarah — Brisbane, QLD — sells her bookkeeping business after 18 years, aged 61, in connection with retirement. Sale price $850,000. Cost base $50,000. Gross capital gain $800,000. 15-year exemption: Sarah held the asset 18 years, was 61 at sale, in connection with retirement. The full $800,000 is disregarded. Sarah's CGT bill on the sale is $0. The retirement exemption and the 50% active asset reduction were technically available, but the 15-year exemption is stronger and consumes the entire gain. Order matters — and the order in s 152-10 is mandatory, not a planning choice. FORWARD-LOOKING NOTE. The 1 July 2027 reform replacing the 50% CGT discount does NOT affect Division 152 SBCGT concessions as currently legislated. The 50% active asset reduction in s 152-205 is a separate provision from the Div 115 general discount and is not in scope for the announced reform. Confirm before acting once draft legislation is released. Try the [SBCGT eligibility wizard](/sbcgt-eligibility-wizard) for your specific facts, or the [CGT calculator](/cgt-calculator) for individual asset disposals.

Statute references

• ITAA 1997 Division 152 (Subdivisions A to E) (small business CGT concessions)
• ITAA 1997 Subdivision 152-A (basic conditions, $6M net asset value test, $2M turnover test, active asset test)
• ITAA 1997 Subdivision 152-B (15-year exemption)
• ITAA 1997 Subdivision 152-C (50% active asset reduction)
• ITAA 1997 Subdivision 152-D (retirement exemption, $500,000 lifetime cap)
• ITAA 1997 Subdivision 152-E (small business rollover)
• ITAA 1997 s 152-10(2) (additional conditions for shares and trust interests)
• Eichmann v Federal Commissioner of Taxation [2020] FCAFC 155 — land used to store business tools and equipment can satisfy the active asset test in s 152-40(1)(a) ITAA 1997 even without direct functional integration with day-to-day operations. Full Federal Court rejected a narrow 'direct functional relevance' reading.

Frequently asked questions