Selling a Business? Capital Gains Tax Explained Simply

If you're thinking about selling, one of the first questions is usually "how much tax will I pay?" The honest answer is that it depends on your structure, how long you've owned the business and whether you qualify for the small business concessions. This guide explains how selling a business capital gains tax works in Australia, what can reduce it, and the questions to ask your accountant before you list.

General information only. This isn't tax or financial advice. Speak to your accountant or a registered tax agent about your own situation.

How capital gains tax works when you sell a business

Capital gains tax (CGT) isn't a separate tax. A capital gain is added to your assessable income and taxed at your usual rate. In simple terms, your capital gain is what you receive for an asset minus its cost base, which is mostly what you paid for it plus certain costs of buying and selling it.

When you sell a small business, the sale price is usually split across things like goodwill, plant and equipment, and stock. Each part can be treated differently for tax, so how the price is split in the contract matters. Whether you sell the business assets or the shares in a company also changes who pays the tax and how. Our guide to a share sale or an asset sale explains the difference.

What can be taken off the gain

Some costs of selling can form part of the cost base, which can reduce the gain. These include incidental costs such as broker commission and legal fees on the sale. Your accountant will confirm which costs count in your case.

If you've owned an asset for at least 12 months and you sell as an individual or through a trust, you may also be able to use the general 50% CGT discount. Companies can't use this discount.

Small business CGT concessions that can reduce the tax

This is where many owners are pleasantly surprised. The ATO has four small business CGT concessions:

• 15-year exemption. You can disregard the whole capital gain if the asset has been owned continuously for at least 15 years and the relevant person is 55 or older and retiring, or permanently incapacitated.
• 50% active asset reduction. This halves the capital gain on a business (active) asset. It applies automatically if you meet the basic conditions, unless you choose not to use it.
• Retirement exemption. Gains can be exempt up to a lifetime limit of $500,000. If you're under 55, the amount has to be paid into a complying super fund or retirement savings account.
• Rollover. This lets you defer a capital gain from selling a business asset for at least two years, and longer if you buy a replacement asset.

You can use more than one concession on the same gain. The order matters. The 15-year exemption is applied first. If it doesn't apply, you take off any capital losses, then the general CGT discount, then the 50% active asset reduction, and then the retirement exemption or rollover. For some owners, the 50% active asset reduction and the 50% CGT discount together can cut the taxable gain by 75%. The order and the mix make a real difference, so this is one to work through with your accountant.

Do you qualify for the small business CGT concessions?

To use any of the concessions, you need to meet some basic conditions. The main ones are:

• Turnover test. You're a CGT small business entity with aggregated turnover of less than $2 million (rising to $10 million for the 50% active asset reduction from 1 July 2027), or
• Net asset test. The total net value of your CGT assets is not more than $6 million. Your home (to the extent it's private) and your super aren't counted.
• Active asset test. The asset you're selling must be an active asset, such as one used in running your business.

There are extra conditions for each concession and for assets held through companies and trusts. These thresholds can change, so check them with your accountant before you sign anything.

CGT changes from 2027: what sellers should know

The 2026 Federal Budget announced changes to capital gains tax, and they are now law. The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received Royal Assent on 26 June 2026. From 1 July 2027, the 50% CGT discount will be replaced by cost base indexation for gains arising on or after that date, with a 30% minimum tax on net capital gains. Gains arising before 1 July 2027 still get the 50% discount.

The good news for small business owners is that the small business CGT concessions stay in place, and one gets better. From 1 July 2027, the turnover threshold for the 50% active asset reduction rises from $2 million to $10 million, so more businesses can use it. With the general discount going, that reduction becomes even more valuable. Some sellers may also need a valuation of their business as at 1 July 2027 to split gains before and after that date. If you're planning to sell in the next few years, ask your accountant how the timing could affect you.

Questions to ask your accountant before you list

You don't need to have every answer before you talk to a broker. These questions help you go in with a clearer picture:

• Do I qualify for the small business CGT concessions, and which ones suit me?
• Should I sell the assets or the shares, and what does that mean for tax?
• How should the sale price be split between goodwill, equipment and stock?
• Which selling costs can be included in my cost base?
• Does it make sense to put some of the proceeds into super?
• How do the 2027 changes affect my timing?
• Roughly how much should I set aside for tax after the sale?

Bringing these questions to your accountant early, while you get your business ready for sale, gives you time to plan. If retirement is part of the reason you're selling, our guide to succession planning is a good next read.

Selling a business and capital gains tax start with knowing what it's worth

Your capital gains tax bill depends on your sale price, so the first useful number is what your business is worth. Our guide on how much your business is worth explains how small businesses are valued in Australia.

Your selling costs matter too. Bonza charges 4% commission plus GST, with a $4,000 minimum. You can also see how selling with Bonza works, step by step.

You don't need to make any big decisions right now. A clear number and a chat with your accountant are a good place to start.

FAQs

Do you pay capital gains tax when you sell a small business in Australia?

Usually, yes, if you make a capital gain on the business assets or shares you sell. The gain is added to your assessable income. The small business CGT concessions can reduce it, and in some cases remove it completely.

How much capital gains tax will I pay when I sell my business?

There's no single figure. It depends on your sale price, your cost base, how long you've owned the business, your structure and which concessions you qualify for. Your accountant can estimate it once you know what your business is likely to sell for.

What is the 15-year exemption for small business CGT?

It lets you disregard the whole capital gain if the asset has been owned continuously for at least 15 years. The relevant person must also be 55 or older and retiring, or permanently incapacitated.

Can I avoid capital gains tax by putting the money into super?

The small business retirement exemption can make gains tax exempt up to a lifetime limit of $500,000. If you're under 55, that amount must be paid into a complying super fund or retirement savings account. Check the conditions with your accountant first.

Will the 2027 CGT changes affect small business owners selling a business?

The changes are now law and replace the 50% CGT discount with indexation for gains from 1 July 2027. The small business CGT concessions remain, and the turnover threshold for the 50% active asset reduction rises from $2 million to $10 million from the same date. Talk to your accountant about how this affects your timing.

Find out what your business is worth with Bonza's free, no-obligation pricing tool, then take that number to your accountant.

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