If your business sells an asset, such as property, you usually make a capital gain or loss. This is the difference between what it cost you and what you get when you sell (or dispose of) it.

CGT is the tax that you pay on any capital gain. It's not a separate tax, just part of your income tax.

Capital gains and losses – CGT events

The most common way to make a capital gain or loss is by selling an asset. This is called a CGT event.

Examples of CGT events are when you:

  • sell or give an asset to someone
  • lose an asset or it is destroyed
  • own shares that are cancelled, surrendered or redeemed
  • stop being an Australian resident
  • get a payment from a company (not a shareholder dividend).

If you use your home for business, you might have to pay CGT when you sell it.

Ways to reduce your capital gain – CGT concessions

There are 4 small business CGT concessions that you can use to reduce capital gain on business assets. You can apply for as many concessions as you're entitled to – this may reduce the capital gain to zero. Just make sure you meet the CGT concession conditions.

Small business 15-year exemption

You won‘t have an assessable capital gain when you sell a business asset if:

  • your business has owned the asset for at least 15 continuous years
  • you're aged 55 years or over
  • you’re retiring or permanently incapacitated

Small business 50% active asset reduction

If you own a small business, you can reduce your capital gain on active business assets you have owned for 12 months or more by 50%.

Small business retirement exemption

If you sell a business asset, capital gain from the sale is exempt up to a lifetime limit of $500,000. If you're under the age of 55, you must pay the exempt amount into either a:

  • complying superannuation fund
  • retirement savings account

Small business rollover

If you sell an active asset, you can defer all or part of a capital gain for two years, or longer if you acquire a replacement asset or incur expenditure on making capital improvements to an existing asset.

You don't include the gain in your income until a change in circumstances causes a CGT event to happen. For example, you don't buy a replacement asset in the required time or you sell the replacement asset. Visit the Australian Taxation Office (ATO) website for more information on small business rollover.

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