Proposed Changes to the Small Business CGT Concessions: Why Now Is the Time to Start Planning

Future Accounting
16 hours ago
4 min read

Protect. Preserve. Prosper.

Introduction

For many Australian business owners, selling a business is one of the biggest financial events of their lifetime. Whether you're planning to retire, pass the business to family members or sell to a third party, the tax outcome can differ by hundreds of thousands of dollars depending on how—and when—the sale occurs.

The Federal Government has announced proposed changes to Australia's Small Business CGT Concessions that may create valuable planning opportunities for many growing businesses. Although these reforms are not yet law, now is the ideal time to understand what is proposed and consider what it could mean for your future.

The good news

The Government has indicated it intends to retain all four Small Business CGT Concessions.

15-Year Exemption – no proposed change.
Retirement Exemption – no proposed change.
Small Business Rollover – no proposed change.
The proposed change relates to the 50% Active Asset Reduction.

So what is actually changing?

Currently, one way to qualify for the 50% Active Asset Reduction is for the business to have aggregated turnover of less than $2 million (subject to the existing rules and alternative eligibility pathways such as the Maximum Net Asset Value Test). The Government has announced that it proposes increasing this turnover threshold to $10 million from 1 July 2027.

Current rules	Proposed rules (from 1 July 2027)
Business turnover under $2 million ↓ May qualify for the 50% Active Asset Reduction	Business turnover under $10 million ↓ May qualify for the 50% Active Asset Reduction

Why the Small Business CGT Concessions Changes Matter

Many privately owned businesses have grown beyond the current $2 million turnover threshold but are still very much small businesses. The proposed increase may allow more of these businesses to access the 50% Active Asset Reduction when selling an active business asset.

The biggest opportunity isn't the concession—it's the planning

The greatest value isn't simply the proposed law change. It's the opportunity to plan before a sale occurs. Many effective tax strategies need to be implemented well before contracts are signed. Starting the conversation 12–24 months before a planned sale can provide significantly more options.

A practical example

Assumptions:

Business turnover: $5 million
Expected capital gain: $2 million
Active business asset
Maximum Net Asset Value Test not satisfied
Illustrative example only

Sell before 1 July 2027	Sell after 1 July 2027 (if the proposed law commences)
No access to the 50% Active Asset Reduction because turnover exceeds $2 million.	May qualify for the 50% Active Asset Reduction because turnover is below the proposed $10 million threshold.
Capital gain remains $2,000,000 before remaining CGT rules.	Capital gain reduced by $1,000,000 before remaining CGT treatment.
Potentially substantially higher tax payable.	Potential tax saving of hundreds of thousands of dollars depending on the owner's circumstances.

Does every business under $10 million qualify?

No. The proposed increase does not automatically make every business eligible.

The active asset rules must still be satisfied.
The basic eligibility conditions continue to apply.
Alternative tests, such as the Maximum Net Asset Value Test, remain relevant.
Professional advice remains essential.

Planning opportunities worth discussing now

Whether delaying a future sale until after the proposed commencement date is appropriate.
Whether your business structure remains suitable.
Whether your assets qualify as active assets.
Succession and retirement planning.
Whether an asset sale or share sale is likely to produce the better outcome.
How the broader proposed CGT reforms may affect your long-term plans.

How 3P's Future Accounting can help

Protect – Review your structure and identify opportunities before a transaction occurs.

Preserve – Protect the wealth you've spent years building.

Prosper – Develop an exit strategy focused on maximising your after-tax outcome through proactive planning.

Important legislative note

This article is based on current Government announcements. At the time of publication, the proposed reforms have not yet been fully enacted into law. The final legislation, regulations and ATO guidance may differ from the proposals outlined above.

Final thoughts

The proposed changes could represent an excellent planning opportunity for many growing Australian businesses. More importantly, they provide a reason to begin planning early. If you're considering selling your business within the next five years, now is the perfect time to review your structure, succession plans and potential tax outcomes.

Contact 3P's Future Accounting

If you'd like to understand how these proposed changes may affect your business, contact the team at 3P's Future Accounting. We'll help you Protect your wealth, Preserve what you've built and Prosper into the future.

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.