Entity Setup

Small Business Entity? Big Changes to CGT Concessions Eligibility

The threshold for accessing small business CGT active-asset discounts is increasing from $2 million to $10 million turnover. Here’s what that means and how startups and small business owners can benefit.

By NomadicTax Research Team • 5-8 min read • July 9, 2026

## Understanding the CGT Concessions for Small Businesses Australia offers several **small business CGT concessions** such as the **active asset reduction**, **retirement exemption**, **15-year exemption**, and rollover provisions. Eligibility typically depends on: - having an aggregated turnover under a threshold (currently AUD 2 million) ([ministers.treasury.gov.au](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/tax-reform-implementation-small-business-and-startups?utm_source=openai)); - satisfying other tests such as the active asset test, maximum net asset value test (if required), and associated asset use. ([ato.gov.au](https://www.ato.gov.au/Business/Income-and-deductions-for-business/Concessions%2C-offsets-and-rebates/Small-business-CGT-concessions/Small-business-CGT-concessions-eligibility-conditions/CGT-concessions-eligibility-overview/?page=4&utm_source=openai)) ## What’s Changed in Thresholds and Access - The turnover threshold for the **active asset CGT reduction** is being lifted from **AUD 2 million** to **AUD 10 million**, so about 98% of active businesses will now be eligible. ([ministers.treasury.gov.au](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/tax-reform-implementation-small-business-and-startups?utm_source=openai)) - A new concession for “innovative businesses” is being designed. Eligible firms include those under 10 years old (or 15 in certain sectors), under AUD 50 million in turnover, meeting innovation criteria, and holding shares for at least **five years**. Founders, early investors or those participating in employee share schemes may benefit. ([ministers.treasury.gov.au](https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/tax-reform-implementation-small-business-and-startups?utm_source=openai)) ## Actionable Steps for Small Businesses & Startups - **Check your aggregated turnover**: If you’re between AUD 2 million and AUD 10 million, you might newly qualify for the active asset reduction—giving you a **50% CGT discount** on profits from active business asset disposals. - **Prepare for the innovative business concession**: - If you’re a startup or early-stage investor, plan equity issuance that meets the “new shares” requirement. - Track holding periods to satisfy the five-year requirement. - Evaluate whether the lifetime cap will limit your gains; structure share classes or trusts accordingly. - **Monitor legislation**: While many details are announced, some are still in consultation (e.g. final criteria, sectors, the cap). You should track Senate Bills for final wording. - **Plan asset sales timing**: Consider whether disposing of an active asset before the reforms are effective or after yields a better after-tax position depending on eligibility. ## Real-World Example Alex owns a tech startup with turnover of **AUD 8 million**. Currently, because her turnover is above AUD 2 million, she doesn’t qualify for the active asset CGT reduction. Under the new reforms, she will be eligible. If she sells active business assets, she may reduce her capital gain by 50% under that concession (plus any inflation-adjustment where applicable). Meanwhile, Ben is an early investor in a biotech startup that has been operating for 12 years—but with low commercialisation. Since certain sectors like biotech or medtech may have the eligibility period extended to 15 years, he might still meet criteria under the innovative business concession, subject to design. --- **In summary**, these changes greatly expand access for many small businesses and startups—especially those already growing past the AUD 2 million mark. But fulfilling conditions like active-asset tests, holding periods and qualifying equity will be essential. If you’re in this space, it’s worth modelling potential CGT outcomes under both existing and new rules.