Division 152 provides four CGT concessions for retiring small business owners. The 15-year exemption disregards the entire gain where the asset has been held 15+ years and the owner is 55 or older and retiring. For shorter hold periods, the 50% active asset reduction, $500,000 retirement exemption, and small business rollover apply. Exempt amounts can be contributed to super via the CGT cap outside the NCC cap, up to $1,865,000.
For an Australian business owner selling at retirement, the headline capital gain can look alarming. A business built over 20 years may have a cost base of near zero, and a sale price of $800,000, $1 million, or more produces a gain that at top marginal rates would generate a CGT bill large enough to materially change the retirement outcome. Division 152 of the Income Tax Assessment Act 1997 provides a set of four specific concessions designed precisely for this situation — and their combined effect, for eligible owners, can reduce a substantial CGT liability to nothing, while directing the proceeds into superannuation above the standard contribution caps.
What are the four Division 152 CGT concessions?
The 15-year exemption (Division 152-B) is the most powerful. Where a CGT asset has been continuously owned for at least 15 years, the owner is 55 or older at the time of disposal, and the owner is retiring or permanently incapacitated, the entire capital gain is disregarded. There is no requirement that the sale proceeds be used in any particular way — the gain simply does not arise. For business owners who have spent their working life building the enterprise and are now selling to fund retirement, this is often the applicable concession and it can eliminate the CGT event entirely.
Where the 15-year exemption does not apply — because the holding period is shorter, or the eligibility conditions are not met — the other three concessions can be applied in sequence. The 50% active asset reduction (s.152-C) halves the capital gain after the general 50% CGT discount for assets held over 12 months has already been applied. The combined effect is that only 25% of the original gain remains as assessable income: a $400,000 gain becomes $200,000 after the general discount, then $100,000 after the active asset reduction. The retirement exemption (Division 152-D) then provides a further lifetime limit of $500,000 that can be excluded — owners 55 and over can receive the exempt amount as cash, while owners under 55 must contribute it to superannuation. The small business rollover (Division 152-E) allows any remaining gain to be deferred by rolling it into a qualifying replacement asset acquired within two years of the disposal, with the deferred gain recognised when the replacement asset is eventually sold.
Who is eligible for the small business CGT concessions?
The concessions apply to CGT assets that are "active assets" — assets used in the course of carrying on the business — and require the entity to pass either a Small Business Entity test or a maximum net asset value test. The SBE test for Division 152 purposes uses a $2 million aggregated turnover threshold (separate from the general $10 million SBE threshold for other purposes). The maximum net asset value test requires that the net value of the assets of the entity and its connected entities not exceed $6 million. Both tests involve specific definitions of "connected entities" and related lookthrough rules. Pre-sale eligibility verification with a specialist small business tax accountant is essential — the concessions do not apply automatically, and the eligibility analysis can be complex in trust or company structures.
What is the CGT super contribution cap?
One of the most powerful but least-understood features of the small business CGT framework is the CGT cap. Amounts exempted under the 15-year exemption and the retirement exemption can be contributed to superannuation as "CGT cap contributions" — entirely outside the standard non-concessional contribution cap. The CGT cap for FY2025-26 is $1,865,000 (ITAA 1997 s.292-100, indexed annually). This means that a business owner qualifying for the 15-year exemption on a $1 million sale can potentially contribute much of those proceeds to super above the standard $120,000 non-concessional cap — resulting in a substantial super balance top-up with no CGT on the underlying gain.
For a 62-year-old selling a business after 20 years of ownership with a $1 million capital gain, the 15-year exemption disregards the entire gain, and the proceeds (up to the $1,865,000 cap) can be contributed to super as a CGT cap contribution. The retirement outcome — super-funded, zero CGT — is materially better than the default treatment of a $1 million taxable gain.
Why does pre-sale planning matter for the CGT concessions?
The time to consider CGT concession strategy is before the sale is agreed, not after. Several pre-sale decisions affect the outcome: confirming eligibility under the turnover or net asset value test; ensuring the active asset test is met for the assets being sold; planning around the 15-year holding period where it is not yet met; considering the structure of the sale (asset sale versus share sale, which produce different CGT outcomes and different interactions with the concessions); and planning the super contribution strategy to maximise the CGT cap. For substantial sales, this planning is typically worth thousands or tens of thousands of dollars in improved outcomes relative to the cost of specialist advice.
Key takeaways
- Division 152 of the Income Tax Assessment Act 1997 provides four small business CGT concessions: the 15-year exemption (disregards the entire gain where the asset has been held 15+ years and the owner is 55 or older and retiring), the 50% active asset reduction, the $500,000 lifetime retirement exemption, and the small business rollover.
- The 15-year exemption is the most powerful — it disregards the entire capital gain with no requirement to use the proceeds in any particular way. It is often the relevant concession for retiring business owners who built the enterprise over decades, and it can eliminate the CGT event entirely.
- Eligibility requires the entity to pass either the SBE turnover test ($2 million aggregated turnover for Division 152 purposes, separate from the general $10 million threshold) or the maximum net asset value test ($6 million). Pre-sale eligibility verification is essential — the concessions do not apply automatically and the analysis is complex in trust or company structures.
- The CGT cap allows amounts exempted under the 15-year exemption and the retirement exemption to be contributed to super as CGT cap contributions, entirely outside the standard NCC cap. The cap for FY2025-26 is $1,865,000 (ITAA 1997 s.292-100, indexed annually).
- Pre-sale planning — confirming eligibility, ensuring the active asset test is met, considering asset versus share sale structure, and planning the super contribution strategy — materially improves outcomes. For substantial sales, specialist small business tax and financial advice before the sale is agreed is essential.
Frequently asked questions
What is the 15-year CGT exemption for small business owners?
Under Division 152-B, where a CGT asset has been continuously owned for at least 15 years, the owner is 55 or older at disposal, and the owner is retiring or permanently incapacitated, the entire capital gain is disregarded. There is no proceeds-use requirement. This is the most powerful of the four concessions and, for owners selling after decades of business ownership, is often the applicable one. The exempted amount can be contributed to super via the CGT cap (up to $1,865,000 in FY2025-26), entirely outside the standard NCC cap.
What are the eligibility tests for the small business CGT concessions?
Eligibility requires the entity to satisfy either a Small Business Entity test (aggregated turnover under $2 million for Division 152 purposes — separate from the general $10 million SBE threshold) or a maximum net asset value test (net value of entity and connected entity assets not exceeding $6 million). The CGT asset must also be an active asset — one used in the course of carrying on the business. Eligibility analysis is complex in trust or company structures and requires specialist small business tax accounting advice before the sale is agreed.
How does the 50% active asset reduction work with the other concessions?
The 50% active asset reduction (ITAA 1997 s.152-C) applies after the general 50% CGT discount for assets held over 12 months. The combined effect is that only 25% of the original gain remains assessable: a $400,000 gain becomes $200,000 after the general discount and $100,000 after the active asset reduction. The $500,000 retirement exemption can then be applied to that reduced gain — owners 55 or older can take the exempt amount as cash, while owners under 55 must contribute it to superannuation. The small business rollover defers any remaining gain into a replacement asset acquired within two years.
What is the CGT cap contribution and how much is it in FY2025-26?
Amounts exempted under the 15-year exemption and the retirement exemption can be contributed to super as CGT cap contributions under ITAA 1997 s.292-100, entirely outside the standard non-concessional contribution cap. The CGT cap for FY2025-26 is $1,865,000 (indexed annually). This allows a retiring business owner who qualifies for the 15-year exemption on a $1 million business sale to contribute much of the proceeds to super above the standard $120,000 NCC cap, with zero CGT on the underlying gain.