For many Perth business owners, selling the business is the largest single financial event of their working life. It is also the point where tax planning either pays off substantially or fails to, and the difference is rarely small. The small business CGT concessions can reduce tax on a sale to nil — but only where eligibility has been established, and eligibility is usually decided by decisions made years before the sale.
What are the four concessions?
The 15-year exemption disregards the entire gain where you have owned the asset continuously for 15 years and are retiring at 55 or over, or are permanently incapacitated. The 50% active asset reduction halves the remaining gain, and applies on top of the general 50% CGT discount, so a long-held asset can see the taxable gain cut to a quarter. The retirement exemption lets you disregard gains up to a lifetime limit, with amounts paid into superannuation if you are under preservation age. The rollover defers the gain where you acquire a replacement active asset within the statutory window. They are applied in a set order and can be combined.
Who is eligible?
Two gateways exist and you need one of them. Either you are a small business entity — carrying on a business with aggregated turnover below the relevant threshold — or you satisfy the maximum net asset value test. Beyond that, the asset itself must pass the active asset test: broadly, it was used in carrying on a business for at least half the period you owned it, or seven and a half years where ownership exceeded fifteen. A commercial property leased to an unrelated third party generally fails this; the same property used in your own business, or leased to your own operating entity, generally passes.
Why does the net asset value test catch people out?
Because it counts far more than the business. The test looks at the net value of the CGT assets of you, your connected entities and your affiliates immediately before the sale. Your main residence and superannuation are generally excluded, but investment properties, shares, and assets held in a family trust or a spouse's name are not. Owners who have quietly built a property portfolio alongside the business frequently discover they are over the threshold, and the discovery usually comes after contracts are signed, when nothing can be done. This is precisely why the structure you trade through and what sits alongside it deserve a review well before any sale.
What is different when selling shares or units?
Selling shares in your trading company, rather than the business assets themselves, brings in extra conditions. The entity must satisfy a test that broadly 80% of its assets by value are active, you must be a significant individual or CGT concession stakeholder, and there are look-through rules where interposed entities are involved. Buyers often prefer an asset sale to avoid inheriting the company's history, while sellers often prefer a share sale for tax reasons. That tension is a negotiating point with real dollars attached, and it is better identified early than discovered during due diligence.
How do the concessions interact with superannuation?
This is where the planning becomes valuable. Amounts exempted under the 15-year exemption or the retirement exemption can generally be contributed to super under the CGT cap, which sits outside the ordinary concessional and non-concessional contribution caps. For an owner selling in their late fifties, that can mean moving a substantial sum into a concessionally taxed environment in one step. The rules are exacting: a valid election must be made, the contribution must be made by a specified time, and the paperwork must reach the fund. Miss a deadline and the contribution counts against the ordinary caps instead, with excess contributions tax attached.
When should planning start?
Years before the sale, not weeks. The things that determine eligibility — who owns the asset, whether the active asset test is satisfied, what sits in related entities, whether you are a significant individual — are mostly locked in by the time a buyer appears. Restructuring in the shadow of a sale attracts scrutiny and can trigger its own tax consequences. A review two or three years out gives room to act; the same review during settlement gives you an accurate figure and no options.
What records will you need?
Original purchase contracts and settlement statements, records of capital improvements, evidence of how the asset was used across the whole ownership period, financial statements supporting the turnover or net asset value position, and trust deeds or company constitutions for the entities involved. Records for CGT assets need to be kept well beyond the ordinary five-year period — effectively until five years after the asset is sold. A missing settlement statement from 2004 is a genuine problem when it is the evidence for a cost base.
These concessions are among the most valuable in the tax system and among the easiest to fall just outside. The Metier Group advises Perth business owners on structuring and exit planning through our tax and accounting services. Contact us well before you go to market, so the options are still open.