If you own a business and one day plan to sell it, one announced change deserves your attention. The government has confirmed it will lift the turnover threshold for the small business 50 per cent active asset reduction from $2 million to $10 million, as part of its tax reform package for small business and startups.

What is changing

The 50 per cent active asset reduction is one of the small business capital gains tax (CGT) concessions. It can cut the taxable capital gain on an active business asset in half. The Prime Minister's announcement says that with the new threshold, all 2.7 million active small businesses, and 98 per cent of all active businesses, will be eligible. That brings roughly 180,000 more businesses into reach of the concession.

The other small business CGT concessions, including the 15 year exemption, the retirement exemption and the rollover, are not described as changing. Their existing eligibility rules still apply.

What is still to be confirmed

This is an announced policy, not yet law. Commentary suggests the change is expected to apply from 1 July 2027, but you should check the final legislation before you rely on any date. The announcement also covers other measures, including a proposed concession for early stage startup investors and relief for some testamentary trusts, which are separate from this change.

What to do now

  • Work out your turnover. Check your aggregated turnover for the last few years against the old and new limits, including connected and affiliated entities.
  • Review your sale timing. If you are thinking about selling in the next two years, talk to your accountant before signing anything. The date a change takes effect could affect when it is best to sell.
  • Check your assets are active. The concession is about active business assets, so keep records showing how each asset has been used in the business.
  • Keep your records. Hold on to purchase documents, improvement costs and ownership records for the life of the asset and five years after you dispose of it.
  • Look at your structure. Whether you hold assets personally, in a company or through a trust changes how the concessions apply, so get advice before making changes.

A conversation with your accountant now is far cheaper than finding out at sale time that a concession was within reach if you had planned earlier.

This article is general information only and does not take your circumstances into account. Speak to your accountant before making decisions.