If you’re planning to sell your business or a major business asset in the next few years, the sale price isn’t the only number worth thinking about. What you actually walk away with can look very different once capital gains tax (CGT) enters the picture.

And with significant changes to Australia’s CGT rules taking effect from 1 July 2027, when you sell, what you sell and the structure you sell through could all influence the final tax outcome.

This article is written specifically for business owners operating through a company, trust or other entity structure. We’ll look at how capital gains on selling business assets work, the small business CGT concessions that may reduce your tax, what changes from 1 July 2027, and why planning well before a sale matters.

How Capital Gains on Selling Business Work at the Entity Level

If you hold shares or property personally and sell at a profit, you understand the basics: a capital gain arises, and various discounts may apply.

At the entity level, the rules work differently, and the differences matter significantly to your after-tax outcome.

Companies do not access the 50% general CGT discount that individuals and trusts can use. If a company makes a $500,000 capital gain, the general 50% CGT discount cannot simply be applied to halve that gain. The company may still be eligible for small business CGT concessions, however, depending on the circumstances.

Companies are also not subject to the new 30% minimum tax on real gains that applies from 1 July 2027 to individuals, trusts and partnerships. Their capital gains continue to be taxed at the company tax rate, with any available CGT small business concessions applied according to their own rules.

Trusts have more flexibility. A discretionary trust selling the same asset and distributing the gain to an individual beneficiary can access the 50% general discount, reducing the taxable amount to $250,000. If the asset also qualifies as an active asset and small business CGT concessions apply, the gain can be reduced further still.

For gains accruing from 1 July 2027, the general 50% discount for individuals and trusts is replaced by cost‑base indexation and a 30% minimum tax on real gains. The small business CGT concessions remain available and are not replaced by these new rules, so they can still be used to reduce or eliminate tax on eligible business gains.

This is why entity structure can have such a significant effect on what you ultimately keep from a business sale.

And as of 1 July 2027, another layer needs to be considered.

What’s Changing from 1 July 2027

Australia’s CGT rules are changing.

Under the current system, eligible individuals and trusts can generally reduce a capital gain by 50% where an asset has been held for at least 12 months.

For gains accruing from 1 July 2027, that general 50% discount will be replaced for individuals, trusts and partnerships with:

• • Cost‑base indexation (an inflation adjustment to the asset’s cost base), and
  • A 30% minimum tax rate on real capital gains.

Instead of automatically reducing an eligible capital gain by 50%, indexation adjusts the asset’s cost base for inflation. The intention is to tax the gain above inflation rather than simply applying the same percentage discount regardless of how long an asset has been held or how prices have changed.

That means:

• • Value accrued before 1 July 2027 continues to be dealt with under the existing CGT discount rules, even where the asset is sold later.
  • The new rules apply only to gains accruing from 1 July 2027 onwards.

For business owners with valuable assets or a business sale on the horizon, that makes record keeping and timing particularly important. A future sale may involve both the existing and new CGT regimes.

Companies already do not receive the general 50% CGT discount, so the implications can also differ significantly depending on whether you are selling assets held by a company or selling shares personally.

Small business CGT concessions are preserved. The four existing small business CGT concessions remain available where eligibility tests are met, and they are not replaced by the new indexation and 30% minimum tax rules. From 1 July 2027, the turnover threshold for the 50% active asset reduction will also increase from $2 million to $10 million, expanding access to this concession.

The takeaway? Don’t assume the headline CGT changes will affect every business sale in exactly the same way.

Your entity structure, the asset being sold, how long it has been held and the small business concessions available all need to be considered together.

Our tax accountant and business advisory services can help you work through that review with the right questions.

Small Business CGT Concessions

Despite the broader changes to CGT, the existing four small business CGT concessions remain available where the eligibility requirements are satisfied.

These concessions can potentially reduce, defer or even eliminate a capital gain arising from the sale of a qualifying business asset.

To access the concessions, you first need to satisfy the relevant basic conditions. Depending on your circumstances, this may include having aggregated annual turnover of less than $2 million or satisfying the $6 million maximum net asset value test. From 1 July 2027, the turnover threshold for the 50% active asset reduction will increase from $2 million to $10 million, while the other three concessions (15‑year exemption, retirement exemption and rollover) continue to use the existing $2 million / $6 million tests.

Connected entities and affiliates can also need to be included when applying these tests, so eligibility isn’t always as straightforward as looking at your business’ turnover or assets in isolation.

The asset will also generally need to satisfy the active asset test, which considers how the asset has been used in connection with the business during the ownership period.

1. The 15-year exemption

This can allow you to disregard the entire capital gain if you have owned a business asset for at least 15 years, and you are 55 or older and retiring,or permanently incapacitated. For long-term business owners nearing retirement, this is often the most valuable concession available and can result in a zero tax outcome on the full gain.

2. The 50% active asset reduction

This concession can reduce the capital gain by 50% once the basic eligibility conditions are met. This is commonly used in combination with the general CGT discount.

3. The retirement exemption

The small business retirement exemption can allow eligible taxpayers to disregard up to $500,000 of capital gains over their lifetime. If you are under 55, the exempt amount must be contributed to superannuation. For business owners who are not yet at the 15-year mark, this is often the most accessible concession.

4. The small business rollover

Rather than immediately paying tax on an eligible gain, the small business rollover can allow you to defer all or part of it.

This can be useful where you’re selling one business asset and reinvesting in another business or replacement asset, although specific replacement asset and timing requirements apply.

Why Combining CGT Concessions Can Make Such a Difference

The real power of the small business CGT concessions is that, in some circumstances, more than one concession can apply to the same gain.

For example, under the current rules, an eligible individual or trust may first be able to apply the general CGT discount and then the 50% active asset reduction. Depending on the circumstances, the retirement exemption or rollover may then apply to some or all of the remaining gain.

From 1 July 2027, the interaction between the new indexation regime and the existing small business CGT concessions will need to be considered instead for affected gains. Importantly, the small business CGT concessions are preserved under the 2027 reforms and are not replaced by the new indexation and 30% minimum tax rules. They can still be applied to reduce or eliminate tax on eligible business gains.

This is one reason generic CGT calculators can only tell you so much.

A $500,000 gain does not automatically equal a particular tax bill. The answer depends on the entity involved, the nature and history of the asset, available capital losses, the applicable CGT regime and which concessions you qualify for.

Asset Sale vs Share Sale: A Decision That Changes Everything

One of the most consequential decisions you’ll face when selling a business is whether to structure the transaction as an asset sale or a share sale. Most first-time sellers don’t fully understand the difference, and the tax outcomes can vary substantially.

In an asset sale, the company or entity sells individual assets such as equipment, property, goodwill, or customer contracts. Tax is paid at the entity level on any gains. Buyers often prefer this structure because they receive a stepped-up cost base on the assets they acquire, which gives them future depreciation benefits.

In a share sale, the individual shareholders sell their shares in the company. The gain arises at the shareholder level rather than the company level. This may unlock the 50% general CGT discount and potentially the small business CGT concessions at the shareholder level, which can produce a materially better after-tax outcome for the seller.

From 1 July 2027, for gains accruing after that date, the general 50% discount on share gains for individuals and trusts will be replaced by cost‑base indexation and a 30% minimum tax, but small business CGT concessions may still apply if eligibility tests are met.

The preferred structure often differs between buyer and seller. Buyers typically prefer asset sales; sellers often prefer share sales. This tension is negotiable, but it needs to be addressed early in any sale process. Raising it at the last minute, when heads of agreement have already been signed, significantly reduces your room to move. If you’re thinking ahead about how your business is structured before a sale, our small business restructure service is designed for exactly this kind of planning.

Private Rulings: When It’s Worth Getting Certainty First

For higher-value transactions where the tax outcome is material, an ATO private ruling can be worth the time and cost. A private ruling gives you a binding position on how the ATO will apply the tax law to your specific circumstances before you complete the transaction.

The ATO typically takes 28 to 60 days to process a private ruling, and more complex matters can take longer. If a transaction is time-sensitive, that timeline needs to be factored in early.

The intersection of tax law and commercial structure in a business sale is complex enough that specialist input matters. We work with tax specialists who have both tax expertise and a legal background, including practitioners from firms such as RBP Solutions, where that combination of disciplines is central to how they approach CGT planning. The legal dimension becomes particularly relevant when restructuring, reviewing entity documents, or assessing whether the conditions for a concession have genuinely been met.

Growing a Business and Selling a Business Are the Same Conversation

The best preparation for selling a business is the same as the best preparation for growing it.

Buyers and advisers will scrutinise your financial history. They want to see clean books, consistent records, and a business that looks like it has been run with care. Misclassified expenses, inconsistent coding, or a balance sheet that doesn’t reflect reality can affect both your valuation and your ability to demonstrate eligibility for CGT concessions.

Active asset eligibility, for example, depends on being able to show how the asset was used in the business over time. If your records are patchy, demonstrating that use becomes harder. Similarly, the aggregated turnover and net asset value tests require accurate, well-maintained financial data across connected entities.

As a general rule, advisers and buyers want to see at least 12 to 24 months of clean financial history. The more history you have that reflects good processes and accurate records, the better positioned you are, whether you’re seeking finance, attracting a buyer, or demonstrating concession eligibility.

Keeping your financial records clean now puts you in a stronger position whether you’re growing the business, seeking finance, bringing in investors or preparing to sell.

The Rhythm Financial team works with business owners to get those financial foundations in place well before a transaction begins.

Questions Worth Asking Your Adviser Before Any Sale Process Begins

You don’t need to know every CGT rule yourself. You do need to know which questions to ask.

• • On your entity structure: Does my current entity structure give me access to the 50% CGT discount, or am I locked out of it at the entity level?
  • On the asset: Does the asset I’m planning to sell qualify as an active asset under the ATO’s definition, and do I have the records to demonstrate that?
  • On the 15-year exemption: Have I held this asset for long enough to access the 15-year exemption, and does my age or retirement status affect my eligibility?
  • On concession stacking: Which concessions apply to my situation, can I use more than one, and in what order should they be applied?
  • On the sale structure: Would a share sale or an asset sale produce a better after-tax outcome in my circumstances, and how does that affect what concessions I can access?
  • On restructuring: Could restructuring ahead of the sale improve my concession eligibility, or would that create other risks or trigger a separate CGT event?
  • On the proposed changes: Given the indexation proposals currently in discussion, should I be revisiting my planned sale timeline?
  • On certainty: Is a private ruling worth pursuing given the size of the transaction, and how long would it take?

Capital Gains on Selling Business: Taking the Next Step

Capital gains on selling business assets is one of the more complex areas of Australian tax law, particularly at the entity level. The structure you’re operating through, the nature of the asset, your holding period, your age and retirement plans, and the legislative environment at the time of sale all influence the outcome.

What’s clear is that the planning window matters. If you’d like to understand which concessions you might qualify for, whether your current structure is working in your favour, and how the proposed changes could affect your timeline, we’d be glad to help you map that out before you sit down with a tax specialist. Get in touch with our team to start that conversation. The earlier it begins, the more options remain open.

Frequently Asked Questions

Do companies get access to the 50% CGT discount?

No. Companies are not entitled to the general 50% CGT discount, regardless of how long an asset has been held. Only individuals and trusts distributing to individual beneficiaries can access it. This is one of the reasons why entity structure matters so much when planning for a business sale.

Can I access the small business CGT concessions if I operate through a company?

Yes, in certain circumstances. The small business CGT concessions can apply to gains made by companies, but the general discount does not. Whether the concessions apply depends on whether the company meets the eligibility tests, including the $2 million turnover or $6 million net asset value threshold, and whether the asset qualifies as an active asset. The interplay between the company tax rate, the lack of discount, and the available concessions needs to be modelled specifically for your situation.

What happens if I restructure before selling to improve my CGT position?

Restructuring ahead of a sale can improve your access to concessions in some cases, but it can also create risks, including triggering CGT events during the restructure itself, or failing to meet holding period requirements for certain concessions. Any restructuring should be assessed by a tax specialist before it’s implemented, and ideally well in advance of any planned sale.

How long does it take to access the 15-year exemption?

You need to have owned a qualifying active asset for at least 15 continuous or substantially continuous years. You also generally need to be 55 or over and retiring, or permanently incapacitated. There are additional conditions relating to your role in the business. If you’re approaching the 15-year mark, the timing of a sale relative to that threshold can make a significant tax difference.

Is the CGT discount changing, and should I be selling sooner?

Changes to the CGT discount have been proposed but are not yet legislated as at the date of this article. The direction of the proposals, if adopted, could affect how gains are calculated for individuals and trusts. Whether it makes sense to bring forward a sale depends on your specific circumstances, the nature of the asset, how long you’ve held it, and current market conditions. This is a planning question rather than a panic question, and it’s worth working through with your adviser.