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It is crucial to understand all elements of the small business CGT concessions to avoid any negative outcomes for clients, a tax adviser has cautioned.
Tax advisory expert flags common small business CGT concession errors
10 April 2025
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9 minute read
Small business capital gains tax concessions are the most lucrative concessions offered to taxpayers that arise when a business or shares are being sold.
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According to Ani Tuna, head of tax advisory at BlueRock, the small business CGT concessions can frequently present challenges and difficulties if not properly accessed.
Tuna said the stakes in small business CGT concessions were huge and that it was increasingly important to get right amid the countless factors and considerations.
“In some case, you can ultimately have the entire, let’s call it the profit or the gains from whatever it is that you’re selling, completely disregarded, which is a huge win. Or sometimes it might just be as simple as having it halved,” she said.
"What you stand to gain is huge. The difficulty is that the rules are quite complex so its a bit of balancing [between] what you're going to get and also making sure that you're pulling in the right experts to ensure that you are actually meeting all the conditions."
Speaking on a recent Under the Hood podcast episode, Tuna and co-host Lee-Ann Hayes said the four main concessions include the active asset discount, the retirement exemption, the 15-year exemption and the rollover.
Both Tuna and Hayes outlined the importance of the concessions and their specific design for SMEs, or smaller operators, which included businesses with $2 million worth of turnover or net assets less than $6 million.
Once this criterion was met, the more critical and complex elements begin to apply, which can sometimes lead to common or recurring errors.
Tuna said there was often a mix between general misunderstandings and more complex misunderstandings among taxpayers and advisers with limited experience.
In terms of the $2 million turnover test or the $6 million net asset value test, generally only one needs to be satisfied rather than both, which is a common misconception, she said.
One of the other general misunderstandings is with the retirement exemption, she added.
“It's probably the worst-named concession, because it somewhat implies that to get the concession you need to be retiring, which is entirely untrue,” Tuna said.
“The rules are designed to effectively set you up for retirement. So, the requirement is to potentially put that money in super, but there is no requirement to retire, and I think people often get that concession, and the 15-year exemption completely misunderstood. It’s a common error I often come across, as well as the more obvious misunderstandings.”
Hayes agreed that while the active asset test often receives a lot of focus, other aspects of the rules are sometimes forogtten. She also warned that looking at the turnover test or active active asset test in isolation, rather than how they connected and interacted could also lead to errors being made.
In addition, identifying the taxpayer was another common trap or difficulty within the process, according to Tuna and Hayes.
“If you get the taxpayer wrong in the context of small business CGT concessions, that can be fatal to your analysis because the rules actually differ depending on whether the taxpayer is an individual or whether the taxpayer is a trust or company,” Tuna said.
“In addition to that, once the taxpayer is identified, the second question becomes, what is the asset to which we’re trying to apply the concessions? Because, again, depending on whether that asset is shares or it’s a business, the rules differ.”
Despite the complexity and countless differing factors, Tuna said the small business CGT concessions were her “first love”.
“I distinctly remember this being one of the very first things I learned in my career. At the time of starting out, I was trying to develop a deep understanding of the rules and I think I noticed as I was doing that, people really underestimated how complex they were,” she said.
“Over the years, I really developed that deep understanding and I spent hours and hours dissecting every word and every condition, and that was when the love for them came in, because I had the opportunity to start thinking more strategically about the rules.”
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