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CGT small business concessions and contributions to super

Basic conditions for CGT relief

Section: 8.2

Where a capital gain arises from the sale of active assets, the three basic conditions that must be met to qualify for CGT small business concessions are:

1 Maximum net asset value test or aggregated turnover test:

  • the maximum net asset value of assets that the small business entity and entities connected with the taxpayer, affiliates of the taxpayer and entities connected with the taxpayer's affiliates own must not exceed $6 million, or
  • the entity must be a small business entity or a partner in a partnership that is a small business entity.

A small business entity is an entity that carries on a business and the aggregate of its annual turnover plus the annual turnover of connected entities and affiliates satisfy the turn over test.

  • A business entity will satisfy the turnover test if its aggregated turnover: was less than $2 million in the previous income year
  • is estimated to be less than $2 million for the current year, or
  • is actually less than $2 million at the end of the current year.

Access to the small business CGT concessions has been extended to individuals who own a CGT asset used in a business by a related entity as well as partners owning a CGT asset used in a partnership business qualify.

2. Active asset test

An asset does not have to be an 'active asset' immediately before the CGT event. The CGT asset being sold must be an active asset for at least 71/2 years of the ownership period or half of the ownership period. The ownership period starts from the time the taxpayer owns the asset and ends at the time of the CGT event or if the business ceased within the last 12 months, at the cessation of the business.

An active asset is generally an asset that is used, or held ready for use, in the course of carrying on a business by the business owner, an affiliate or related entity of the business owner.

3. Rules for companies and trusts

If the asset being sold is a share in an Australian company or an interest in a resident trust:

  • the entity claiming the concession must be a CGT concession stakeholder in the company or trust, or
  • CGT concession stakeholders in the company or trust must together have a small business participation percentage in the entity of at least 90%.

There are further rules specific to each CGT small business concession.

Last modified: Tuesday, May 2, 2017