Building a small business requires time, effort and sacrifice. The Capital Gains Tax (CGT) can greatly reduce the amount of financial success a small business owner benefits from, which is why CGT concessions are critical to Australian small businesses.
It’s easy for a small business to incur a CGT, yet calculating the tax itself involves complex rules and stipulations that impact the final deduction. This makes it difficult for business owners to predict the ultimate verdict, making them more likely to take a larger hit than anticipated.
Concessions are meant to reduce this burden, but how helpful are they if eligibility is virtually impossible for most small businesses?
Recent amendments to these concessions are attempting to help more Australian small businesses to qualify for concessions, but the Council of Small Business Organisations Australia (COSBOA) critiques the government’s revisions.
What are the CGT concessions?
In Australia, an automatic CGT deduction of 50 per cent is applied to individuals, trusts, and superannuation funds if an asset has been held for 12 months or more, but this does not apply to companies. For a business to get exempt, they must qualify for one of the four CGT concessions.
These concessions include the 15-Year Exemption, the 50 per cent Active Asset Reduction, the Retirement Exemption, and the Small Business Rollover. If the company qualifies for the 15-Year Exemption, this provides complete CGT relief, thus applying for additional concessions would be unnecessary. If needed, the other concessions can be stacked if the applicant qualifies.
Small businesses must go through far greater standards to qualify for an exemption. First, they must meet all the basic eligibility conditions, which includes additional criteria to qualify as an eligible entity. If they qualify, there are then separate requirements for each of the concessions.
The proposed amendments
Since they were introduced in 1999, the concessions underwent changes in 2007 and 2016, but the current conditions do not reflect the environment businesses are operating in today. In advocating for small business owners, the COSBOA has been pushing for reforms on the outdated exemptions.
On 18 June 2026, the Albanese Government released implementation details for its newly developed tax policies. Under the previous conditions, to qualify for the 50 per cent active asset reduction concession, the business would need to qualify under the turnover threshold of $2 million. In the recent reforms, that threshold was increased to $10 million.
With this update, the Albanese Government claims that all 2.7 million active small businesses and 98 per cent of active businesses will be eligible for the 50 per cent discount.
In addition to this reform, a consultation paper was designed to introduce a concession in support of start-ups, called the Innovative Business CGT Concession.
Although progress seems to be made, the COSBOA questions why amendments are made to only one of the four concessions. In a media release on 18 June responding to the Government’s announcement, the COSBOA’s CEO Skye Cappuccio said they are “concerned about the impact the broader CGT changes could have on investment, entrepreneurship and productivity.”
These reforms could initiate further changes, but they are still not enough. Business owners are finding it hard enough to pass the basic eligibility requirements, yet the reforms don’t even address those measures.
How does this affect small business owners?
Out of all businesses in Australia, small businesses account for 97 per cent of them, contributing almost one third of Australia’s total GDP. Adding so much to Australia’s economy, small business owners expect support from their government.
In a media release on 26 May, Ms Cappuccio of the COSBOA stated that for small businesses, “…this is not just a conversation about tax. It is about whether Australia still encourages people to back themselves and build something over the long term.”
Although a small business may want success, they ultimately want to feel supported. Being subjected to a CGT can completely alter a business’s earnings. With limited funding, large hits from a CGT could impact a small business owner, from how they plan for growth, invest in staff, or fund their own retirement.
As noted by the COSBOA, many of these owners have spent years reinvesting their profits into their business rather than taking it in as larger income. Australian small business owners have put faith into projects, that there is long-term value in what they’ve built, and that value will pay off in the future. With CGTs, this disrupts that assumption, leaving vulnerable owners with far less than what their sacrifice earned.
The COSBOA places such concern on these concessions because this is a pattern amongst small businesses. Existing concession thresholds are not aligned with how much it costs to run a business, as noted by Ms Cappuccio.
What still needs to change?
Raising the turnover threshold for the 50 per cent active asset reduction from $2 million to $10 million has been received in caution, but the COSBOA acknowledges how important the change is towards the right direction. They commend the fact that about 180,000 small businesses will now have greater tax relief, making a positive impact on a group of mainly family-owned businesses, manufacturers, professional services firms, transport operators, retailers and trades businesses.
The announcement addresses updates to only one of the four existing Small Business CGT Concessions. In addition to this, eligibility thresholds should be modernised for all the existing concessions. Particularly, the COSBOA calls for businesses with annual turnover under $10 million and net capital assets under $12 million to be covered under additional reforms.
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