The Four Concessions That Can Take a Business Sale to Zero Tax
Four small business capital gains tax concessions can reduce, defer or eliminate the gain on selling an active business asset. Two of them also allow proceeds into superannuation under a separate lifetime cap rather than the ordinary contribution caps, which is what makes them the largest single retirement planning opportunity available to a business owner.
- The answer: The 15-year exemption, the 50% active asset reduction, the retirement exemption and the small business rollover apply in that order to a gain on an active asset.
- The trap: The basic conditions are tested at the time of the CGT event. Restructuring after signing a contract does not help, and the aggregated turnover and net asset tests count connected entities and affiliates.
- The recommendation: Get the eligibility tested before signing anything. These concessions are worth more than any other decision in the sale and they cannot be applied retrospectively.
Where the AI summary above gets this wrong
"Small business owners can put $500,000 from selling their business into super tax-free."
That's surface-true. Here's what it misses:
- That is one of four concessions and it has its own conditions — The retirement exemption has a lifetime limit, requires a choice to be made in writing, and requires the amount to go into super where the individual is under 55.
- The 15-year exemption is more generous and less known — Where it applies, the entire gain is disregarded and the proceeds can go into super under the CGT cap — with no lifetime limit of the retirement exemption's size.
- All four are gated by basic conditions tested at the sale — The aggregated turnover test or the net asset value test, and the active asset test, must be satisfied at the time of the CGT event.
Take an owner selling a business at 58 after twenty years — a composite of the situation these concessions were written for. The gain is the largest single financial event of their life, and whether it is taxed at all turns on tests applied at the moment of sale.
01 The basic conditions
You must be a small business entity with aggregated turnover under the threshold, or satisfy the maximum net asset value test, and the asset must satisfy the active asset test — broadly, used in the course of carrying on a business for at least half the ownership period.
Aggregation is where eligibility is most often lost. Connected entities and affiliates are counted, which brings in a spouse's business, a family trust, and entities controlled by others in certain circumstances.
Where the asset is a share in a company or an interest in a trust, additional conditions apply, including a test on the proportion of the entity's assets that are active and identification of a significant individual.
All of these are tested at the time of the CGT event, which is the contract date. That timing is why advice before the contract is worth many multiples of advice afterwards.
Source: ATO — Capital gains tax
02 The four concessions and the order they apply in
The 15-year exemption comes first. Where the asset has been owned for at least fifteen years and the sale is in connection with retirement at 55 or over, or with permanent incapacity, the whole gain is disregarded and no other concession is needed.
The 50% active asset reduction is next, halving whatever gain remains after the ordinary CGT discount. Applied together the two reduce a gain to a quarter of its original size before the remaining concessions are considered.
The retirement exemption then allows the remaining gain to be disregarded up to a lifetime limit per individual. Where the individual is under 55 the amount must be contributed to super; at 55 or over it does not have to be.
The small business rollover defers the remaining gain for two years, or longer where a replacement asset is acquired. It is a deferral rather than an exemption and is the least used of the four.
Source: ATO — CGT discount
03 Getting the proceeds into super
Amounts sheltered by the 15-year exemption and by the retirement exemption can be contributed to superannuation under the CGT cap, which is a separate lifetime limit sitting outside the non-concessional cap entirely.
That is the mechanism that lets a business owner move a large sum into super in one transaction without triggering the bring-forward rules described in the bring-forward reference, and without their total super balance shutting the door.
The contribution must be made within a specified time of the event and an election form must be given to the fund on or before the contribution is made. A late form is fatal in the same way a late notice of intent is.
The transfer balance cap still applies to how much of the resulting balance can be moved into retirement phase, so a large CGT cap contribution frequently results in an accumulation account alongside a pension.
Shows: how a gain on an active business asset reduces as the ordinary CGT discount, the 50% active asset reduction and the retirement exemption are applied in order. Ignores: the 15-year exemption, which would disregard the whole gain, the basic eligibility conditions, the small business rollover, and any capital losses.
04 Where it goes wrong
Selling the shares in a company rather than the business assets is the first. The concessions apply differently and the additional conditions for shares and trust interests are strict, so the structure of the sale changes the outcome materially.
Failing the aggregation test because of an unrelated business is the second, and it is usually discovered late. A spouse's profitable side business can push aggregated turnover over the threshold for a sale nobody connected to it.
Missing the election deadlines is the third. Both the retirement exemption choice and the CGT cap election have to be made in writing within specified periods, and there is no discretion to accept them late.
And restructuring after the contract is signed is the fourth, which is not a failure so much as an impossibility: the tests are applied at the CGT event and nothing done afterwards changes them.
Source: ATO — Capital gains tax
05 What to do, and when
Test eligibility a year before you intend to sell, not a month. Aggregation problems and active asset problems can sometimes be fixed with time and cannot be fixed at all without it.
Establish which entity holds the asset and who the significant individuals are. That determines whose lifetime limits are available and how the proceeds can be split, which is frequently the difference between one limit and two.
Model the super side alongside the tax side. A CGT cap contribution interacts with the transfer balance cap, with any existing balance, and with the contributions you were otherwise planning — and the sequence matters.
And keep the records that prove the active asset test. Fifteen years of use in a business is easy to assert and harder to evidence, and the evidence is what an audit asks for.
Where a business is sold in instalments or with an earn-out, the concessions apply to each capital gain as it arises, which can spread the eligibility tests across income years in which the answer changes. That is a reason to settle the structure before the terms rather than after.
This is the largest single tax event in most business owners' lives and the tests are applied on the contract date. Everything that can be done has to be done before then. I would get the eligibility assessed a year out — not because the answer is complicated, but because the fixes that exist all need time and none of them works retrospectively.
FAQ
How do the small business CGT concessions reduce tax when I sell my business to retire?
Four concessions apply in order: the 15-year exemption disregards the whole gain where the conditions are met, the 50% active asset reduction halves what remains after the ordinary discount, the retirement exemption disregards up to a lifetime limit, and the rollover defers the rest.
How does the 15-year exemption work when I sell my small business at retirement?
Where the asset has been owned for at least fifteen years and the sale is in connection with retirement at age 55 or over, or with permanent incapacity, the entire capital gain is disregarded and the proceeds can go into super under the CGT cap.
How does the small business retirement exemption work up to the $500,000 lifetime limit?
It disregards the remaining gain up to a lifetime limit per individual, with a written choice required. Where the individual is under 55 the exempt amount must be contributed to superannuation.
Can I contribute my business sale proceeds to super under the CGT cap amount?
Yes, for amounts sheltered by the 15-year exemption or the retirement exemption. The CGT cap is a separate lifetime limit outside the non-concessional cap, and an election form must reach the fund on or before the contribution.
Sources
Regulator references
- ATO — Capital gains tax · Australian Taxation Office · 2026Capital gains tax: the events that trigger it and how the gain is worked out.Last verified: 2026-09-07
- ATO — CGT discount · Australian Taxation Office · 2026The CGT discount on assets held beyond the qualifying period, and who can claim it.Last verified: 2026-09-07
- ATO — Caps, limits and tax on super contributions · Australian Taxation Office · 2026How the contribution caps fit together and what happens when one is exceeded.Last verified: 2026-09-07
- ATO — Total superannuation balance · Australian Taxation Office · 2026Total superannuation balance: what it includes, when it is measured, and the eligibility tests it gates.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.