There are four small business CGT concessions.
Small business 15-year exemption
If your business has owned an asset for 15 years and you are aged 55 years or over and are retiring, or if you are permanently incapacitated, you won’t have an assessable capital gain when you sell the asset.
Small business 50% active asset reduction
You can reduce the capital gain on a business (active) asset by 50%.
Small business retirement exemption
A capital gain from the sale of a business asset will be exempt up to a lifetime limit of $500,000. If you are under 55 years of age, the exempt amount must be paid into a complying superannuation fund or a retirement savings account to obtain the exemption.
Small business rollover
If you sell a small business asset, you can defer your capital gain until a later year. This means you don’t include the gain in your income until a change in circumstances causes a CGT event to happen that crystallizes the gain – for example, you don’t acquire a replacement asset within the required period, or you later sell that replacement asset or stop using it in your business. When a CGT event crystallizes the gain you have previously deferred, all or part of the gain that you deferred becomes assessable.
Basic conditions
To qualify for any of the small business CGT concessions, there are certain basic conditions that must be satisfied. Follow the steps below to determine whether you satisfy the basic conditions.
You must first satisfy at least one of the following conditions:
• you are a small business entity
• you do not carry on business (other than as a partner) but your asset is used in a business
carried on by a small business entity that is your affiliate or an entity connected with you
(passively-held assets)
• you are a partner in a partnership that is a small business entity and the asset is one of the following
• an interest in an asset of the partnership (partnership assets)
• an asset you own (that is not an interest in a partnership asset) that is used
in the business of the partnership (partner’s assets), or
• you satisfy the maximum net asset value test.
Further changes have been made to the CGT small business concessions that are now law. The main changes allow access to the concessions by way of the $2 million turnover test for:
• taxpayers who are not carrying on a business but who own a CGT asset used in the business of
an affiliate or connected entity, and
• partners who own a CGT asset used in the partnership business.
