Australia Small Business Tax Concessions Guide

Australian small business tax concessions. The guide covers: the small business entity (SBE) test — the business is a "small business entity" (the "SBE") if: (a) the aggregated turnover (the "aggregated turnover") is below $10 million (the "SBE turnover threshold"), OR (b) the net asset value of the business is below $6 million (the "net asset value test" — the net value of the CGT assets of the business is below $6 million); the small business entity is eligible for the range of tax concessions; the simplified depreciation (the "instant asset write-off") — the small business entity can immediately deduct the cost of the eligible assets (the "instant asset write-off") under the "temporary full expensing" rules; for the 2025-26 year, the assets costing $20,000 or less (the "instant asset write-off threshold") can be immediately deducted; the assets costing $20,000 or more are depreciated using the "simplified depreciation pool" (the "general small business pool" at 30% for the "general pool" assets and 5% for the "low-value pool" assets); the small business entity can also use the "simplified depreciation" for the "second-hand assets" and the "new assets"; the small business CGT concessions — the small business entity that meets the "basic conditions" (the "SBE test" or the "net asset value test") can access the following CGT concessions: (i) the 15-year exemption (the "15-year exemption" — the capital gain on the "active asset" is exempt from the CGT if the asset is held for at least 15 years and the owner is at least 55 years old and retires), (ii) the 50% active asset reduction (the "50% active asset reduction" — the capital gain on the "active asset" is reduced by 50%), (iii) the retirement exemption (the "retirement exemption" — the capital gain up to $500,000 (the "lifetime limit") is exempt if the proceeds are contributed to the superannuation fund), (iv) the rollover (the "CGT rollover" — the capital gain is deferred if the "replacement asset" is acquired within the 2-year period); the active asset test — the asset must be the "active asset" of the business (the "active asset" — the asset used by the business in the course of carrying on the business, including the goodwill, the land, the buildings, and the other assets used in the business); the PAYG instalment concessions — the small business entity can: (a) opt for the "annual PAYG instalment" (the "annual PAYG instalment" — the business pays the PAYG instalment once per year instead of the quarterly instalments), (b) opt for the "GDP-adjusted notional tax" method (the "GDP adjustment" — the instalment is based on the notional tax adjusted for the GDP growth), (c) claim the "PAYG instalment discount" (the "PAYG instalment discount" — the business that pays the quarterly PAYG instalments can claim the discount of 1% to 3% for the early payment); the GST concessions — the small business entity can: (a) use the "cash accounting" method (the "GST on a cash basis" — the GST is accounted for when the payment is received and the expense is paid, NOT when the invoice is issued), (b) use the "annual GST reporting" (the "annual GST return" — the business lodges the GST once per year instead of the quarterly BAS), (c) use the "simplified BAS" (the "simplified BAS" — the business with the GST turnover below $10 million can use the simplified BAS that reports only the GST on the sales and the GST on the purchases); the FBT concessions — the small business entity that provides the "work-related items" to the employees can claim the exemption from the FBT; the small business entity can also provide the "car parking" to the employees without the FBT (if the commercial parking station within a 1 km radius charges less than the car parking threshold). All amounts in Australian Dollars (AUD). For related reading, see our Starting a Business Guide → and Capital Gains Tax Guide →.

Small Business Entity Test

$10 million turnover: The aggregated turnover (the "aggregated turnover" — the turnover of the business plus the turnover of the connected entities) must be below $10 million. The turnover is the "ordinary income" (the income from the ordinary business activities) of the income year. The affiliated entities and the connected entities are included in the aggregation.
$6 million net assets: The net asset value of the CGT assets (the "net value of the CGT assets") must be below $6 million. The net asset value is calculated as the "market value" of the CGT assets minus the liabilities of the business. The net asset value test is used for the small business CGT concessions (NOT for the other SBE concessions).

For the instant asset write-off and the simplified depreciation pool, see our Starting a Business Guide →.

CGT Concessions — Summary

15-year exemption: The capital gain on the active asset is fully exempt from the CGT if: (a) the asset is held for at least 15 years, (b) the owner is at least 55 years old, (c) the owner retires (the "retirement" — the owner ceases the business or substantially reduces the work). The exemption is available ONCE in the lifetime.
50% active asset + retirement ($500K): The 50% active asset reduction reduces the capital gain by 50%. The retirement exemption exempts the capital gain up to $500,000 (the "lifetime limit") if the proceeds are contributed to the superannuation fund. The retirement exemption is available to the individuals, the companies, and the trusts.

For the CGT rollover and the replacement asset period, see our Capital Gains Tax Guide →.