Unlocking Tax Savings: The New $10 Million CGT Threshold for Small Businesses

For years, the $2 million turnover threshold has been a significant hurdle for many growing Australian businesses seeking to access the Small Business Capital Gains Tax (CGT) concessions. However, as part of the 2026-27 Federal Budget tax reform package, the Australian Government has announced a game-changing update: the turnover threshold for the 50% active asset reduction is being increased from $2 million to $10 million.

This move is set to bring an additional 2.7 million active small businesses into the fold, ensuring that 98% of all Australian businesses can now benefit from these generous concessions. If you are considering selling a business asset or restructuring your operations, this change could mean substantial tax savings.

What Are the Small Business CGT Concessions?

The Small Business CGT concessions are designed to help small business owners reduce, defer, or even eliminate capital gains tax when they sell active business assets (such as land, buildings, or goodwill). There are four primary concessions:

1.The 15-Year Exemption: If you’ve owned an active asset for 15 years and are retiring or permanently incapacitated, you may pay no CGT.

2.The 50% Active Asset Reduction: This allows you to reduce the capital gain on an active asset by 50%.

3.The Retirement Exemption: Capital gains from the sale of active assets are exempt up to a lifetime limit of $500,000.

4.The Rollover: This allows you to defer a capital gain for two years or longer if you acquire a replacement asset.

The Significance of the $10 Million Threshold

Previously, to be eligible for these concessions as a "small business entity," your aggregated turnover had to be less than $2 million. This relatively low cap meant that many successful medium-sized businesses were locked out of the 50% active asset reduction.

By raising the threshold to $10 million, the Government has aligned the CGT concessions with other small business tax reliefs, such as the Instant Asset Write-off. This alignment simplifies the tax system and provides a much-needed boost for "midsized" small businesses that are looking to reinvest or transition.

Who Benefits from This Change?

This expansion is particularly beneficial for:

•Growing Businesses: Companies that have outgrown the $2 million mark but are still firmly in the SME category.

•Business Sellers: Owners looking to exit their business or sell key assets who can now potentially halve their CGT liability.

•Succession Planning: Families looking to pass on a business to the next generation while minimizing the tax impact of asset transfers.

How to Prepare

While this change provides a significant opportunity, accessing CGT concessions remains a complex area of tax law. Eligibility still depends on meeting the "active asset test" and other specific criteria.

If you are planning a sale or restructure in the 2026-27 financial year, now is the time to:

1.Review Your Turnover: Confirm if your aggregated turnover falls within the new $10 million limit.

2.Audit Your Assets: Ensure your business assets meet the definition of "active assets."

3.Seek Professional Advice: CGT concessions are powerful but come with strict compliance requirements. A qualified accountant can help you navigate the rules to maximize your tax position.

The increase to the $10 million threshold is one of the most significant wins for small business owners in recent years. At [Your Firm Name], we specialize in helping Australian businesses optimize their tax outcomes. Contact us today to see how these new rules apply to your situation.