Selling your business is one of the most significant financial events of your life. Yet many SME owners reach settlement day without a clear picture of how much of the proceeds they'll actually keep. Capital gains tax is often the largest single cost in a business sale — and the rules are more nuanced than most people expect.

The good news is that Australia's tax system includes several concessions built specifically for small business owners. Used correctly, they can significantly reduce, defer, or even eliminate your CGT liability. Missed or misapplied, they can cost you hundreds of thousands of dollars.

Here's how CGT applies to a business sale in Australia, which concessions are available in 2026, and what you need to consider before you sign anything.

How CGT Works When You Sell a Business

When you sell a business, you're typically selling a collection of assets — goodwill, equipment, stock, intellectual property, and sometimes real property. Under the Income Tax Assessment Act 1997, each asset is treated as a separate CGT event.

The capital gain on each asset is straightforward in principle:

Sale proceeds minus the cost base = capital gain

The cost base includes what you originally paid for the asset, plus certain acquisition, improvement, and disposal costs such as agent fees and legal expenses. If you've held the asset for more than 12 months, you may be entitled to the general 50% CGT discount before any small business concessions are applied.

Your net capital gain is then added to your assessable income for the year and taxed at your marginal rate — unless concessions reduce or eliminate it.

The Small Business CGT Concessions

Australia's small business CGT concessions are among the most generous in the tax system. There are four of them, and they can be applied in combination. To access any of them, you first need to satisfy the basic eligibility conditions.

Basic Eligibility Conditions

You must meet at least one of the following:

  • Aggregated turnover below $2 million, or
  • Net asset value of $6 million or less across you and connected entities (excluding your home and superannuation)

The asset being sold must also be an "active asset" — broadly, one used in carrying on a business. Goodwill almost always qualifies. Passive investments generally don't.

If you're selling shares in a company or units in a trust that operates the business, additional conditions apply. The entity must pass the active asset test (at least 80% of its assets must be active), and you'll generally need to hold a significant interest of 20% or more.

The Four Concessions

1. 15-Year Exemption

If you've continuously owned the business asset for at least 15 years and you're aged 55 or over (or permanently incapacitated), the entire capital gain is exempt. This is the most powerful concession available — there's no cap on the gain, no requirement to reinvest, and the proceeds can go straight toward retirement.

2. 50% Active Asset Reduction

After applying the general 50% CGT discount for assets held over 12 months, you can apply a further 50% reduction to the remaining gain. The combined effect is that an eligible asset held for more than 12 months could have its taxable gain reduced to just 25% of the original amount.

3. Retirement Exemption

Up to $500,000 of capital gains can be exempted over your lifetime if the proceeds are used for retirement purposes. If you're under 55, the amount must be contributed to a complying superannuation fund or retirement savings account. If you're 55 or over, you can keep the funds without putting them into super.

4. Rollover Relief

If you're reinvesting the proceeds into a replacement active asset — or making a capital improvement to an existing one — within two years of the sale, you can defer the capital gain. This doesn't eliminate the tax; it pushes it to a later CGT event. It's most useful when you're selling one business to buy another.

Applying the Concessions in the Right Order

The concessions must be applied in a specific sequence, and the order matters:

  1. Apply the general 50% CGT discount first (if the asset was held for more than 12 months)
  2. Then apply the 50% active asset reduction
  3. Then apply the retirement exemption (up to the $500,000 lifetime cap)
  4. Then consider rollover relief

Getting this sequence wrong can mean missing out on the full benefit. This is one of the clearest reasons to engage a tax adviser before you sign a sale agreement — not after.

What’s Often Missed: Structuring the Deal

How the sale is structured has a direct impact on your CGT outcome.

Asset sale vs. share sale: In an asset sale, the buyer acquires individual assets and the gains crystallise within the selling entity. In a share sale, the CGT event occurs at the shareholder level, where the 50% CGT discount and small business concessions can apply directly to the individual. Sellers often prefer share sales for this reason. Buyers often prefer asset sales because they receive a stepped-up cost base. Negotiating this point is a normal part of any business transaction.

Earnouts: Where part of the sale price depends on future performance, specific ATO rules govern the tax treatment. A "look-through earnout right" means the payments are treated as part of the original capital gain rather than ordinary income. Getting this wrong can turn a CGT event into an income event — a significantly worse outcome.

Allocation of purchase price: In an asset sale, the total price is allocated across individual assets. That allocation affects the buyer's cost base and the seller's CGT calculation. Both parties have a real interest in negotiating this carefully.

Timing Considerations in 2026

The financial year in which settlement occurs determines when the CGT liability falls. Settlement before 30 June 2026 means the gain is assessable in the 2025–26 income year. Settlement after 1 July 2026 pushes it into 2026–27.

This matters if you have other income events in the year, if you're planning super contributions to reduce your taxable income, or if you're close to a threshold that affects your eligibility for concessions. Timing the settlement date is a legitimate planning tool — worth discussing with your accountant before you set a target completion date.

State Taxes and Other Costs

CGT is a federal tax, but state-level duties may also apply depending on the assets involved. The transfer of commercial real property can attract stamp duty in most states. Business assets like goodwill and equipment are generally exempt from duty in most jurisdictions, though this varies.

GST is also relevant. Most business sales qualify as a "going concern" and are GST-free, provided both parties are registered for GST and the agreement explicitly states the supply is a going concern. If those conditions aren't satisfied, the seller may need to remit 10% GST on the sale price — a costly and avoidable oversight.

Getting the Appraisal Right Before You Sell

Your CGT position starts with knowing what your business is actually worth. An accurate appraisal establishes the likely sale price range, which feeds directly into your tax planning. If you're using the retirement exemption, for instance, knowing whether your gain is likely to sit above or below $500,000 changes how you structure the deal.

At Everest Commercial Property & Business Brokers, business appraisals are part of the pre-sale process. Understanding the numbers early gives your accountant and legal team the information they need to structure the transaction in a way that makes the most of the concessions available to you.

A Note for Investment Migrants and Overseas Buyers

If you're a non-resident selling an Australian business, different CGT rules apply. Non-residents are generally only subject to Australian CGT on "taxable Australian property," which includes real property and indirect interests in land-rich entities. Business goodwill sold by a non-resident may not attract Australian CGT at all, depending on the structure.

For overseas buyers acquiring an Australian business, FIRB approval thresholds apply. In 2026, the general threshold for private foreign investors is $330 million in non-sensitive sectors, though lower thresholds apply in specific industries and for investors from certain countries.

Everest CPBB has cross-border expertise across the Asia-Pacific region and works with buyers and sellers navigating both Australian tax obligations and foreign investment requirements.

Frequently Asked Questions

Do I pay CGT on the full sale price of my business?
No. CGT applies to the capital gain — the sale proceeds minus the cost base of the assets sold. If you've held the business for more than 12 months and meet the eligibility criteria, you may also be entitled to the 50% general CGT discount and the small business concessions, which can substantially reduce the taxable amount.

What is the small business CGT concession threshold in 2026?
To access the concessions, you must either have aggregated annual turnover below $2 million, or net assets of $6 million or less across you and connected entities, excluding your home and superannuation.

Can I put my business sale proceeds into superannuation to reduce CGT?
Yes, within limits. The retirement exemption allows you to exempt up to $500,000 of capital gains over your lifetime if the proceeds are contributed to a complying super fund. If you're under 55, the contribution is mandatory. If you're 55 or over, you can keep the funds without contributing them to super.

Is the sale of a business GST-free?
It can be, if the sale qualifies as the supply of a going concern. Both parties must be registered for GST, and the agreement must explicitly state that the supply is a going concern. If those conditions aren't met, GST may apply to the sale price.

What's the difference between an asset sale and a share sale for CGT purposes?
In an asset sale, gains arise within the selling entity and may be distributed to shareholders. In a share sale, the CGT event occurs at the shareholder level, where the individual may access the 50% CGT discount and small business concessions directly. Each structure carries different tax implications for both parties.

Does CGT apply if I sell my business at a loss?
If the sale proceeds are less than the cost base of the assets, you have a capital loss rather than a capital gain. Capital losses can offset capital gains in the same or future income years, but they can't be used to offset ordinary income.

When should I start thinking about CGT when selling my business?
As early as possible — ideally 12 to 24 months before you plan to sell. Decisions about how assets are held, when to trigger a CGT event relative to the financial year, and how to sequence the concessions can all make a meaningful difference to your final tax position.

What to Do Before You Sell

CGT planning for a business sale is not something you can leave until contracts are being drafted. The deal structure, settlement timing, purchase price allocation, and concession eligibility all need to be worked through before heads of agreement are signed.

Start with a realistic business appraisal so you understand the likely gain. Then work with a tax adviser who knows the small business concessions well. And engage a broker who understands how deal structure affects your after-tax outcome — not just the headline price.

If you're preparing to sell a business in Australia, Everest Commercial Property & Business Brokers can support you from appraisal through to settlement.