Small Business CGT Concessions Expand to $10 Million Turnover

If your business turns over more than $2 million a year, you may have written off the small business CGT concessions as out of reach when you sell, even though the premises you operate from is exactly the asset the concessions were designed to reward. That is changing. The turnover threshold for the small business 50% active asset reduction has been legislated to rise from $2 million to $10 million, bringing a much larger band of owners, including many who own their own commercial premises, within its reach.

What is actually changing, and what is not

The change is narrower than the headline figure suggests, and it is already law, not a Budget promise still working through Parliament. It lifts the turnover threshold for just one of the four small business CGT concessions, the 50% active asset reduction, from $2 million to $10 million, sitting in the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026), which received Royal Assent on 26 June 2026 and applies from 1 July 2027. The other three concessions, the 15-year exemption, the retirement exemption and the small business rollover, keep the existing $2 million turnover test, though all four remain reachable through the alternative $6 million net asset value test, which has not moved. A separate proposed carve-out for start-up founders and investors is only an exposure draft (released 11 September 2026, consultation closing 28 September 2026), not yet introduced to Parliament, and targets shares in eligible companies rather than a trading business's own premises, so it sits alongside this reform, not inside it.

Why this matters if you own your business premises

Owners who hold their commercial premises personally, or through the entity that runs the business, are the group this reform reaches most directly. Under the old $2 million threshold, a business turning over $4 million or $6 million could own a valuable active asset and still fail the turnover test, with no guarantee the net asset value test would rescue it.

From 1 July 2027, that gap closes: a business with turnover up to $10 million can access a 50% reduction on the gain from selling an active asset, and premises used to operate the business are a textbook example, provided it otherwise meets the existing tests.

A premises sale is often the largest single component of selling a business, so being excluded purely on a turnover technicality has been a real frustration for owners in the $2 million to $10 million band.

The active asset test, the rent exclusion and the 80% rule

Reaching the turnover threshold is only the first hurdle. The asset itself still has to pass the active asset test in section 152-35 of the Income Tax Assessment Act 1997, and this reform does not touch it.

• The premises must have been an active asset for at least half your ownership period, if you have owned it for 15 years or less.
• If you have owned it for more than 15 years, it must have been an active asset for at least 7.5 years.
• The premises must be used, or held ready for use, in carrying on the business, not simply owned by the same person or entity that runs it.

Two other rules matter more now that more owners can reach them. Paragraph 152-40(4)(e) of the Act excludes an asset used mainly to derive rent from being an active asset, even where a business operates from it. The ATO treats that exclusion as not applying where the business itself generates the substantial majority, commonly put at around 80%, of the property's income, so a partly leased premises needs testing against your own figures.

If you hold your interest as shares in a company or units in a trust rather than the property itself, at least 80% of the market value of its assets must be active business assets for the shares or units to qualify. Neither test has changed.

A separate, unfinished measure: the start-up carve-out

The proposed Innovative Business CGT Concession targets founders, early employees and investors in innovative companies, not owners of trading premises. As only an exposure draft, its final shape, including company eligibility and holding periods, may still change before, or if, it becomes law. Treat any detail as provisional until it reaches Parliament.

Talk to us before you plan a sale

A higher turnover threshold changes the maths for many businesses previously locked out on that ground alone, but it does not remove the need to check the active asset test, the rent exclusion and the 80% rule against your own structure, and it does not start until 1 July 2027. Speak to us about your circumstances before you plan a sale around it.

Disclaimer: This article contains general information only and does not constitute financial, legal or tax advice. It has been prepared without regard to your objectives, financial situation or needs. Tax and superannuation laws change frequently, and the information in this article may not reflect the current law or may become inaccurate over time. Before acting on anything in this article, you should consider its appropriateness to your circumstances and seek advice from a registered tax agent or qualified adviser.