Capital gains tax for business

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.

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.