Tax advice on small business CGT concessions

We will help you understand and apply the CGT concessions available to qualifying small businesses on the disposal of active assets.

Most small business owners do not realise the extent to which capital gains tax can be reduced or eliminated on the sale of their business through concessions specifically designed for qualifying businesses. The concessions are generous, but the eligibility requirements are exacting and the rules governing how they interact with each other are technical. A business sale that is structured without considering the available concessions can result in a tax liability that significantly erodes the sale proceeds. We advise small business owners on their eligibility, the concessions available, and how to structure their transaction to maximise the tax benefit achievable.

What are the small business CGT concessions and how do they work?

The small business capital gains tax concessions are a set of measures in the Income Tax Assessment Act 1997 (Cth) that allow eligible small businesses to reduce, defer, or completely eliminate capital gains made on the disposal of active business assets. To access the concessions, the taxpayer must satisfy the basic conditions, including either the $2 million aggregated annual turnover test or the $6 million maximum net asset value test. There are four main concessions: the 15-year exemption (which provides a complete CGT exemption for assets held for at least 15 years by a qualifying taxpayer), the 50% active asset reduction, the retirement exemption (allowing up to $500,000 of capital gains to be permanently exempted), and the small business rollover. The concessions can be combined in some circumstances to reduce a tax liability to zero.

Do I qualify for the small business CGT concessions?

Qualifying for the small business CGT concessions under the Income Tax Assessment Act 1997 (Cth) requires satisfying the basic conditions, which include either the $2 million aggregated annual turnover test or the $6 million maximum net asset value test. You must also satisfy the active asset test, which requires the asset being sold to have been an active business asset for a specified portion of the ownership period. The rules are detailed and the calculations can be complex, particularly where the business is held through a trust or company structure. We advise on eligibility before you enter into a sale transaction.

What is the 15-year exemption?

The 15-year exemption provides a complete capital gains tax exemption on the disposal of a business asset that has been held for at least 15 years, where the taxpayer is 55 or older and the disposal is in connection with retirement or is the result of permanent incapacity. It is the most valuable of the small business CGT concessions because it eliminates the capital gain entirely with no requirement to contribute to superannuation or otherwise reinvest the proceeds. We advise on whether the 15-year exemption is available for your specific transaction.

Can I use the retirement exemption to contribute to superannuation?

The retirement exemption allows up to $500,000 (lifetime limit) of capital gains from the disposal of active business assets to be permanently exempted from CGT. If the taxpayer is under 55 at the time of the disposal, the exempt amount must be contributed to superannuation or a retirement savings account. If the taxpayer is 55 or older, no contribution is required. Where both the 50% active asset reduction and the retirement exemption apply, the $500,000 cap applies to the reduced gain. We advise on how to maximise the benefit of the retirement exemption within the overall strategy for your transaction.

When should I seek CGT concession advice?

CGT concession advice should be sought before you sign a sale agreement, not after. The concessions can affect how the transaction is structured, whether an asset sale or share sale is more appropriate, and how proceeds are distributed or reinvested. In some cases, the timing of a disposal relative to other events in a business’s history also affects the eligibility outcome. Seeking advice early gives you the greatest flexibility to take full advantage of the concessions available.

Eligibility confirmed before you commit to a transaction.

Strategy to maximise the tax benefit available.

Advice that works alongside your accountant.

The CGT concessions for small businesses are generous, but they require planning to access.

Eligibility depends on specific tests that must be satisfied before the transaction is structured, not after the sale contract is signed. The sooner the analysis is done, the more options you have.

You may be entitled to pay no CGT on the sale of your business, but only if the structure is right.

You are about to sell your business and you know there will be a capital gain. You have heard that qualifying small businesses can reduce or avoid CGT on a sale, but you are not certain whether you qualify, which concessions apply, or whether the structure being used for the sale will allow you to access them. The difference between good advice and no advice on this question can amount to hundreds of thousands of dollars.

We will assess your eligibility for the small business CGT concessions.
We will advise on the combination of concessions that produces the best tax outcome.
We will structure your transaction to ensure the concessions are available.
We will work with your accountant to ensure the legal and tax positions are aligned.

You are selling your business and you want to know how much tax you actually need to pay.

You have decided to sell, and your accountant has told you there will be a capital gain on the transaction. You have heard about the small business CGT concessions, but you are not sure whether you qualify or how to access them. Your sale agreement is being drafted, the buyer is ready to move, and you know this is the moment to get the structure right. Getting this wrong will cost you significantly more in tax than good advice at this stage would.

What's included in your small business CGT concession advice service

Eligibility analysis for each of the four main small business CGT concessions.
Advice on which concessions apply and how they can be combined.
Transaction structuring advice to support access to the concessions.
Coordination with your accountant on legal structure and tax reporting.
Retirement exemption advice and superannuation contribution requirements.

What happens when sellers miss the small business CGT concessions?

Business owners who sell without CGT concession advice regularly pay significantly more tax than they needed to. The most common failure is discovering eligibility for a concession after the transaction has been structured in a way that prevents access to it. An asset sale structure chosen for simplicity, or a shareholder who does not meet the basic conditions test because of the way the business is held, can disqualify an otherwise eligible seller from concessions worth hundreds of thousands of dollars. In some cases the sale agreement itself contains terms that inadvertently affect eligibility. Once settlement has occurred, the opportunity to apply the concessions as they were intended may be permanently lost. Every year, business owners who sold without proper advice discover that they paid far more tax than the law required.

Here is how we make sure the concessions work for you.

We begin by reviewing your business structure, ownership history, and the proposed transaction to determine which concessions apply and whether any structural steps are needed before the sale to preserve access to them. We then advise on the combination of concessions that produces the best tax outcome for your specific circumstances and work with your accountant to ensure the legal structure of the transaction supports that position.

Our role is to make sure the transaction is designed from the outset so that the tax benefit you are entitled to is actually achievable. Business owners who engage us before the sale agreement is signed consistently achieve better tax outcomes than those who seek advice after the terms are settled.

Three steps to accessing the CGT concessions on your business sale.

Eligibility confirmed, strategy set, transaction structured for the best outcome.

Assess eligibility.

We review your business structure, asset ownership, and trading history to determine which small business CGT concessions you qualify for and whether any steps are needed to preserve eligibility before the sale proceeds.

Set the strategy.

We advise on the combination of concessions that produces the best tax outcome for your transaction and coordinate with your accountant to ensure the legal and tax positions are aligned.

Structure the transaction.

We provide the legal framework for the sale that supports the CGT position you want to achieve and confirm that the documentation is consistent with the concession strategy.

Tax lawyers with extensive experience in small business CGT concessions and business sale transactions.

We understand that the prospect of a large CGT bill at the end of a successful sale can feel deeply unfair, particularly when the concessions exist specifically to address that outcome for qualifying businesses. Our tax team has advised on the small business CGT concessions across a wide range of industries, transaction structures, and ownership arrangements, including companies, trusts, and partnerships.

We know the conditions that are most commonly misunderstood, the structuring steps that are most often overlooked, and the interactions between the four concessions that produce the best outcomes. When we tell you what your tax position is, we have worked through the detail to make sure it holds.

We understand you want to know the cost, before we get started.

We will map out our process, from beginning to end, so you know what the journey will look like before you get started.

We will provide you with a clear and detailed Work Proposal covering each step along the way.

Our fair fees are all-inclusive. No hidden costs for telephone calls, emails, photocopying, couriers, or coffee.

Our great lawyer guarantee

We want to be part of your team over the long term. We achieve this by adhering to these core principles:

Take the time

We listen carefully to understand what you want to achieve. Then we thoroughly explain our advice and step you through the documents. You can be sure you know the full consequences.

Share our knowledge

We will pass on as much knowledge as we can, so you can make your own informed decisions. We want to make you truly independent.

Stick to our knitting

We only do what we're good at. You can be confident that we know what we're doing and don't pass on the cost of our learning.

Work as one team

Someone will always be available to answer your questions, or point you in the right direction. You will also benefit from a range of perspectives and experience.

Fair pricing

For advice and documents, we provide a fixed or capped quote so you don't take price risk. If you're in a dispute, we map out the process and costs so you know what to expect.

It's your show

We're not in this for our egos. We're in it for a front row seat to witness your success.

Ready to find out how much CGT you actually need to pay on your business sale?

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