Read this first. This article is general information only. It is not tax, legal or financial advice and it does not take your circumstances into account. Tony Pope is a licensed business broker, not a registered tax agent, tax adviser, accountant or solicitor, and is not authorised to advise you on capital gains tax. Whether any concession applies to you depends on your entity structure, your turnover, your net assets, how long assets have been held and how a sale is structured. Get advice from a registered tax agent or your accountant before you make any decision. Do not act on anything in this article without it.
The tax treatment of capital gains in Australia is changing, and if you are within a few years of selling a business it is worth understanding the shape of it. What follows is background, not advice.
Before you read this: what this article is and is not
This is a plain explanation of announced and legislated changes. It is not a recommendation about your situation, your timing or your structure. Those decisions belong with your accountant.
What is actually changing on 1 July 2027
For individuals, trusts and partnerships, the general 50 per cent capital gains tax discount is replaced by cost base indexation, with a 30 per cent minimum tax applying to the resulting real gain.
Indexation adjusts what you paid for an asset in line with inflation, so tax applies to the gain above inflation rather than the full nominal gain. Assets acquired before 20 September 1985 also come into the regime for growth after the commencement date.
Transitional rules mean gains accrued before 1 July 2027 keep their existing treatment.
What is not changing: the four small business concessions
The four small business CGT concessions are being retained. For many business owners these matter far more than the general discount, because in the right circumstances they can reduce a gain substantially or remove it entirely.
They remain subject to their own eligibility tests, which are detailed and unforgiving. Whether you satisfy them is an accountant's assessment, not a broker's.
The $10 million threshold, and the one concession it applies to
From 1 July 2027 the aggregated turnover threshold for the small business 50 per cent active asset reduction increases from $2 million to $10 million, bringing it into line with the instant asset write off threshold.
This is the point most commentary gets wrong, so it is worth being precise. That increase applies only to the 50 per cent active asset reduction. The other concessions continue to use their existing tests, including the $2 million turnover test and the $6 million maximum net asset value test.
Why timing a sale around tax rarely works on its own
Owners occasionally ask whether they should rush a sale to land before a tax change. It is the wrong question in isolation.
A business sold in a hurry, without preparation, with records that are not ready, typically attracts a lower price and more conditions. That discount is frequently larger than the tax difference being chased. Preparation moves price far more reliably than timing moves tax.
The sensible sequence is to understand your tax position with your accountant, understand your market position with a broker, and then decide.
What to ask your accountant before you go to market
Whether an asset sale or a share sale suits your circumstances. Whether you are likely to satisfy the small business concession tests. How the proceeds would be received and what that means. Whether anything in your current structure should be addressed before a contract exists rather than after.
Ask early. Some of it cannot be fixed late.
Where a broker fits, and where a broker does not
A broker's job is the market: what the business is likely to sell for, who the buyers are, how it is presented, and how the process runs confidentially. Tax is not a broker's job and you should be wary of any broker who tells you otherwise.
The useful arrangement is your accountant and your broker having the conversation in parallel, well before you go to market.
Common questions
Is the 50% CGT discount being abolished?
For individuals, trusts and partnerships the general 50% discount is replaced from 1 July 2027 with cost base indexation and a 30% minimum tax on the real gain. Gains accrued before that date keep the current treatment.
Do the small business CGT concessions still exist?
Yes. The four small business CGT concessions are being retained. The turnover threshold for the 50% active asset reduction increases from $2 million to $10 million from 1 July 2027.
Does the $10 million threshold apply to all four concessions?
No. The increase applies only to the 50% active asset reduction. The other concessions continue to use their existing tests.
Should I sell before July 2027 to avoid the change?
That is a question for your accountant, not a broker. Selling a business badly to catch a tax date usually costs more than the tax saved. Preparation drives price far more than timing does.
Full disclaimer. The information in this article is general in nature, current as at the date of publication, and provided for background only. It is not tax, legal, financial or investment advice, and no advice relationship is created by reading it. Tony Pope is a licensed business broker under Queensland OFT licence 4963575 and a member of the Australian Institute of Business Brokers. He is not a registered tax agent, tax adviser, qualified accountant, registered valuer or solicitor, and does not provide taxation, legal or accounting services.
Taxation law changes, and elements of the measures described here commence on 1 July 2027 with transitional rules that may apply differently to your situation. Some implementation detail was still moving through Parliament at the time of writing. The authoritative sources are the Australian Taxation Office and the Treasury, and their guidance prevails over anything stated here.
Eligibility for any capital gains tax concession depends on matters specific to you, including your entity structure, aggregated turnover, maximum net asset value, active asset status, holding period, connected entities and affiliates, and how the sale is structured as an asset sale or a share sale. Two businesses that look identical can have completely different tax outcomes.
Before making any decision about selling, or about the timing of a sale, obtain independent advice from a registered tax agent or qualified accountant, and from a solicitor for the legal aspects of any transaction. No responsibility is accepted for any loss arising from reliance on this article. If anything here conflicts with advice from your own adviser, follow your adviser.