Small business capital gains tax: concessions explained

Published Wednesday 17 June 2026

Table of contents

• What is capital gains tax in Australia?
• Small business CGT concessions eligibility criteria
• The four main small-business CGT concessions
• How to calculate capital gains tax in Australia
• How much is capital gains tax in Australia?
• FAQs on small business capital gains tax

Key takeaways

• Apply for small business CGT concessions by meeting at least one of two eligibility tests: either having an aggregated turnover under $2 million, or holding total net business assets of no more than $6 million, and ensuring the asset you're selling is an active asset used in your business.
• Combine multiple CGT concessions on the same asset sale to maximise your tax savings — for example, stacking the 50% active asset reduction with the general 50% CGT discount can reduce a capital gain by up to 75%.
• Calculate your capital gains tax liability by subtracting the asset's full cost base (purchase price, transaction costs, and improvement costs) from the sale price, then apply any eligible concessions and discounts before reporting the gain in your tax return.
• Report capital gains or losses in your tax return for the financial year when the sale occurred, and complete a CGT schedule if your total capital gains or losses exceed $10,000 for that year.

What is capital gains tax in Australia?

Capital gains tax (CGT) is the tax you pay on profits when you sell a business asset for more than you paid. The capital gain becomes part of your taxable income and is reported in your tax return.

CGT rules change over time. For example, the government increased the foreign resident CGT withholding rate to 15% at the start of 2025 and removed the A$750,000 property value threshold.

CGT applies to most business assets, including:

• Property and buildings: commercial premises, warehouses, and land
• Equipment and machinery: vehicles, tools, and manufacturing equipment
• Shares and investments: business shares, managed funds, and cryptocurrency
• Intellectual property: patents, trademarks, and goodwill

You can learn more about capital gains tax from the ATO website.

When does CGT apply? (CGT events)

You trigger a capital gains tax event when you sell, transfer, or dispose of a business asset. This is known as a CGT event. The most common CGT event happens when you sell an asset to someone else, but it can also occur if an asset is lost or destroyed.

You must calculate your capital gain or loss at the time the CGT event occurs, which is usually the date you enter into the contract of sale, not the settlement date.

Small business CGT concessions eligibility criteria

Small business CGT concessions reduce or eliminate the tax you pay when selling business assets. To qualify, you must meet two main tests.

You must meet one of these two tests to qualify:

• Small business entity test: your aggregated turnover must be less than $2 million
• Net asset value test: the total net value of your business assets (plus related entities) must not exceed $6 million

You must also own an active asset, which means the asset is used or held ready for use in running your business.

Check the specific criteria with your adviser or on the ATO website, as the rules can be detailed.

The four main small-business CGT concessions

Four CGT concessions can reduce or eliminate the tax on your business asset sale. You can apply more than one concession to the same capital gain, potentially reducing your taxable amount to zero. Here's how each concession works.

1. Small business 15-year exemption

The 15-year exemption allows you to pay zero CGT on an active asset sale. To qualify, you must meet all of these conditions:

• own the asset continuously for at least 15 years
• be aged 55 or over and retiring, or be permanently incapacitated
• meet the basic small business CGT eligibility tests

2. Small business 50% active asset reduction

The 50% active asset reduction halves your capital gain on an eligible active asset. This reduction applies on top of the general 50% CGT discount for assets held over 12 months.

Combined, these discounts can reduce your taxable capital gain by 75%. For example, you could reduce a $100,000 capital gain to $25,000 before tax.

3. Small business retirement exemption

The retirement exemption lets you exempt up to $500,000 in capital gains over your lifetime. How you use the exemption depends on your age:

• Under 55: you must contribute the exempt amount to a complying superannuation fund or a retirement savings account (RSA)
• 55 or over: no contribution requirement applies

4. Small business rollover

The small business rollover lets you defer (not eliminate) a capital gain when you reinvest in your business. You must acquire a replacement active asset or improve an existing one within two years.

You pay CGT when you eventually sell the replacement asset. This concession helps you reinvest in your business without an immediate tax hit.

How to calculate capital gains tax in Australia

Calculate your capital gains tax when you sell, transfer, or dispose of a business asset. Use this three-step process to work out your tax liability before you sell. You report and pay the tax when you lodge your tax return for that financial year.

You can calculate it yourself or use the ATO capital gains tax calculator through your MyGov account.

Follow these steps to calculate your capital gains tax:

Step 1: Determine the asset's cost base

Add together the purchase price, transaction costs (legal fees, agent fees, stamp duty), improvement costs (renovations, upgrades), and incidental costs (advertising, valuations, and tax advice from a recognised tax adviser). A higher cost base means a lower capital gain. For example: Property purchase $300,000 + Transaction fees $10,000 + Office refurbishment $20,000 = Total cost base $330,000.

Step 2: Calculate the capital gain or loss

Subtract the cost base from the sale price using this formula: Sale price − Cost base = Capital gain (or loss). A capital gain occurs when you sell for more than the cost base. A capital loss occurs when you sell, scrap, or write off for less than the cost base. For example, if you sell the property with the $330,000 cost base for $450,000, the difference is $120,000 – your capital gain. But if your sale only nets $280,000, then $280,000 – $330,000 = –$50,000 – a capital loss.

Step 3: Understand how capital losses affect your CGT

Capital losses cannot reduce your regular income, but they offset capital gains in two ways: reduce capital gains in the same financial year, or carry forward indefinitely to offset future capital gains. Apply capital losses before applying the 50% CGT discount or small business concessions.

Your accountant or financial adviser can help you understand the specific tax implications for your business. You can find an adviser in the Xero adviser directory.

How much is capital gains tax in Australia?

Your CGT rate depends on your business structure and is added to your income tax.

For sole traders and partnerships, you add capital gains to your personal income and pay tax at your marginal rate (16% to 45%). For companies, you pay tax on capital gains at the company rate (30% standard, or 25% for base rate entities with turnover under $50 million).

From 1 July 2024, the government reduced individual tax rates. For example, the 19% rate for incomes up to $45,000 dropped to 16%.

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FAQs on small business capital gains tax

Here are answers to common questions about small business CGT in Australia.

When do I need to report capital gains tax?

You report capital gains or losses in your tax return for the financial year when the CGT event occurred. If your total capital gains or losses exceed $10,000, you must also complete a CGT schedule.

Can I use multiple CGT concessions at once?

Yes, you can combine multiple small business CGT concessions on the same capital gain. For example, you can use the 50% active asset reduction together with the general CGT discount to reduce your taxable gain by up to 75%.

What happens if I make a capital loss?

Capital losses can't reduce your regular income, but you can use them to offset capital gains in the same year. If you have excess capital losses, you can carry them forward indefinitely to offset future capital gains.

Do I pay CGT on my family home?

Your main residence is usually exempt from CGT under the main residence exemption. However, if you use part of your home for business purposes, some CGT may apply when you sell. Check with your tax adviser for your specific situation.

How long do I need to keep CGT records?

You must keep records of asset purchases, sales, and improvements for five years after you lodge the tax return reporting the CGT event. This includes contracts, receipts, and valuations.