Capital Gains Tax in Australia: Chapter 7 - How the Small Business CGT Concessions Work Together - Exit Strategies That Preserve Wealth
- Future Accounting
- May 18
- 4 min read
Written by: Melissa Cunliffe
In the previous chapters, we explored each of the small business CGT concessions individually.
In reality, however, these concessions are rarely used in isolation.
The real value lies in how they are combined, sequenced and tailored to the client’s circumstances.
This is where careful planning can dramatically change the outcome — sometimes turning a large taxable gain into little or no tax.
Understanding the order of concessions
Before looking at strategies, it’s important to understand the typical order in which CGT rules are applied.
The general sequence is:
Calculate the capital gain
Apply capital losses
Apply the 50% CGT discount (if eligible)
Apply the 50% active asset reduction
Apply the retirement exemption and/or rollover
The 15-year exemption, if available, effectively overrides everything — as the gain can be entirely disregarded.
Why sequencing matters
The order in which concessions are applied can change the amount of tax payable, affect how much can be contributed to superannuation, and influence how much cash is retained personally.
This is where strategy becomes just as important as eligibility.
Scenario 1: Full exemption outcome
Facts:
Business owned for 20+ years
Owner aged 60 and retiring
Gain on sale: $1.5 million
Outcome:
15-year exemption applies
Entire gain is disregarded
Tax payable: $0
Key insight
This is the ideal scenario — but it relies heavily on long-term ownership, correct structure and meeting the retirement condition.
Scenario 2: Layering concessions to eliminate tax
Facts:
Gain on sale: $1,000,000
Owner aged 58
Eligible for all concessions except the 15-year exemption
Step-by-step outcome:
Apply 50% CGT discount → $500,000
Apply active asset reduction → $250,000
Apply retirement exemption → $0
Tax payable: $0
Key insight
Even without the 15-year exemption, it is still possible to eliminate the gain entirely through layering concessions.
Scenario 3: Balancing tax outcomes and super contributions
Facts:
Gain after discount: $600,000
Owner aged 52
Wants to maximise retirement savings
Strategy:
Apply retirement exemption
Contribute up to $500,000 to super
Remaining $100,000 may be taxed or managed separately
Key insight
This is not just a tax decision — it is a wealth allocation decision.
Scenario 4: Using rollover for continued growth
Facts:
Gain on sale: $800,000
Business owner intends to reinvest
Strategy:
Apply rollover to defer gain
Acquire replacement asset
Keep capital working in the business
Key insight
Sometimes the best outcome is not eliminating tax — but deferring it to support growth.
Scenario 5: Business premises held separately
Facts:
Business operates through a company
Premises held in a family trust
Both are sold
Planning considerations:
Ensure both entities satisfy eligibility rules
Confirm premises qualify as an active asset
Coordinate concessions across entities
Key insight
Ownership structures can either unlock significant concessions or prevent access entirely.
Strategic themes across all scenarios
Structure drives outcomes
Where assets are held — and how entities are connected — is often the single biggest determinant of eligibility.
Timing is critical
Key timing decisions include when to sell, whether to wait until age 55, whether to hold for 12 months or longer, and whether to restructure early.
Planning must happen before the sale
Once a contract is signed, many planning opportunities are gone and outcomes are largely locked in.
The best results are achieved well in advance.
Tax is only one part of the decision
Good planning considers cash flow, retirement objectives, superannuation strategy, succession planning and commercial realities.
Modelling different scenarios adds value
We often see materially different outcomes depending on which concessions are applied, whether some are deferred or skipped, and how proceeds are distributed.
Common mistakes we see
Assuming eligibility
Clients often assume they qualify — without testing the rules.
Leaving planning too late
By the time a deal is on the table, options are limited.
Poor documentation
Failing to evidence active asset use, ownership periods, or retirement intention.
Ignoring aggregation rules
Family groups often unintentionally exceed thresholds.
Focusing only on tax
The lowest tax outcome is not always the best overall financial outcome.
Practical framework for clients
Do you qualify? (basic conditions)
Which concessions are available?
What is the optimal combination?
What is the broader objective?
What needs to be done before sale?
Key takeaway
The small business CGT concessions are powerful — but only when used strategically and in combination.
The difference between no planning and well-executed planning can be hundreds of thousands — or even millions — of dollars.
Ready to maximise your exit?
The CGT concessions can significantly change your outcome — but only with the right planning in place.
Book a strategy session to assess your options, model scenarios, and ensure you’re preserving as much wealth as possible before you sell.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
