If you own a business in Adelaide and have thought about selling in the next few years, the date to understand is 1 July 2027. That is when capital gains tax changes under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026: for individuals and trusts the 50% discount is replaced by indexation, a 30% minimum tax applies to what is left of an individual’s gain, and, for every entity, assets bought before 20 September 1985 lose their exempt status. The same Act widens one of the small business CGT concessions considerably.
For most owners the question is not “should I sell before then” but “which concessions will I qualify for, and does the answer change on 1 July 2027”. This article walks through the four small business CGT concessions as they apply to a business sale, how they interact with the 2027 changes, and the parts that go wrong in practice.
Why the concessions matter more than the discount
When a business is sold, the capital gain on goodwill, on the premises, and on any shares or units is worked out in a fixed order. Capital losses come off first. Then the general discount, currently 50% for an individual or trust that has held the asset for 12 months. Then the small business concessions in Division 152 of the tax law. Then, from 1 July 2027, the new 30% minimum tax applies to the amount that survives.
That order matters. The 2027 reform replaces the discount and adds a floor to the tax rate, but it leaves Division 152 where it is, applied after those steps. An owner who qualifies for the 15-year exemption pays nothing on the gain now and will still pay nothing on it after 1 July 2027. An owner who qualifies for the 50% active asset reduction and the retirement exemption can often reduce a seven-figure gain to nil today, and the reform does not change that either. The reform bites hardest on owners who do not qualify for the concessions, and it is those owners whose timing decision is real.
The gateway: are you a small business for CGT purposes?
Every concession starts with the basic conditions. The asset must be an active asset, a CGT event must happen to it, and you must pass one of two tests:
- Aggregated turnover under $2 million for the income year, counting the turnover of entities connected with you and your affiliates; or
- Net value of CGT assets of $6 million or less, just before the sale, counting your own assets and those of connected entities and affiliates.
They are alternatives, not a combined test. A business turning over $4 million can still qualify on the $6 million net asset test. The net asset test excludes your home (to the extent it was not used to produce income), your superannuation, personal use assets and life insurance, but it includes investment properties, share portfolios, the goodwill and premises being sold, and, for a couple, the assets of a spouse to the extent they are used in the business. Where a family has an investment property portfolio alongside the business, it is the net asset test that most often fails, and it fails at the moment just before the sale, so a rising property market can tip an owner out of the concessions in the year they need them.
“Connected with” means 40% control, and it catches the family trust and the company owned by the same people. “Affiliate” is narrower: someone who acts in accordance with your directions or in concert with you in running their business, which a spouse or adult child usually is not, unless they are.
The active asset test
The asset must have been an active asset for at least half the period you owned it, or for 7.5 years if you have owned it for more than 15. Goodwill of a business you carry on is an active asset. Premises used in the business are active. Premises leased to an unrelated tenant are not, and premises leased to your own operating company are active only because the company is connected with you.
Shares in a company or units in a trust have an additional 80% test: at least 80% of the market value of the entity’s assets must be active assets, cash and financial instruments inherently connected with the business, or the shares themselves fail. This is where owners with a cash-rich company trip. A company with a $2 million business and $800,000 of accumulated cash sitting in a term deposit as a retained-earnings nest egg may have less than 80% active assets, and the shareholder’s gain on the shares gets no concession. Distributing the surplus before sale, or moving it out under a properly structured dividend, is the fix, and it needs to be done well before the contract date.
The four concessions in the order they are applied
1. The 15-year exemption. If you have continuously owned the asset for 15 years, you are 55 or over and the sale happens in connection with your retirement (or you are permanently incapacitated), the whole gain is disregarded. Nothing else needs to be applied. For a company or trust, there must have been a significant individual (someone with at least a 20% small business participation percentage) for a total of at least 15 years of its ownership, not necessarily continuous and not necessarily the same person, and a significant individual just before the sale must be 55 or over and retiring, or permanently incapacitated. The exempt amount can then be paid out to the CGT concession stakeholders tax-free if paid within two years of the CGT event, extended to six months after the last possible earnout payment, and the Commissioner can extend further. The 15-year exemption is worth more than all the others combined, and it is the one where “retirement” is tested most carefully: the ATO accepts a significant reduction in working hours or a change in the nature of your activities, but selling and continuing to work five days a week for the buyer indefinitely will not pass.
2. The 50% active asset reduction. The gain remaining after the general discount is reduced by a further 50%. For an individual, that means a $1,000,000 gain becomes $500,000 after the discount and $250,000 after the active asset reduction. You can choose not to apply it, which is sometimes right where you intend to use the retirement exemption and want the maximum amount to go into superannuation.
3. The retirement exemption. Up to $500,000 of gain per individual, over a lifetime, is exempt. There is no age requirement, but if you are under 55 the exempt amount must be contributed to a complying superannuation fund by the later of the time you make the choice (generally when you lodge the return) and the time you receive the proceeds; where the proceeds arrive in instalments, each instalment has its own deadline. Over 55, you can keep it. For a company or trust, the amount must be paid to a CGT concession stakeholder within seven days of the choice or of receiving the proceeds, whichever is later, and if the stakeholder is under 55 the company or trust must make that payment directly into the stakeholder’s superannuation fund. A stakeholder aged 55 or over who wants the amount counted against the CGT cap must contribute it within 30 days of receiving it.
4. The small business rollover. The gain can be deferred by acquiring a replacement active asset within the period from one year before to two years after the CGT event. If no replacement is acquired, the deferred gain crystallises at the end of the period, and at that point only the retirement exemption can be applied to it; the discount, the 50% active asset reduction and the 15-year exemption cannot. It is more useful as a two-year deferral than as a permanent solution, and it is often used to buy time to line up the retirement exemption or to move a gain into a different year.
What changes on 1 July 2027
Three things, and only one of them is a change to the concessions themselves.
The 50% active asset reduction opens up to businesses with turnover under $10 million. The Act inserts a new provision that disregards the $2 million turnover gate for this one concession, and only this one. The 15-year exemption, the retirement exemption and the rollover keep the under-$2 million turnover or $6 million net asset gateways. So a business turning over $5 million with $8 million of net assets currently gets nothing; from 1 July 2027 it gets the 50% active asset reduction, but still no retirement exemption and no 15-year exemption.
The general discount is replaced by indexation. For assets held at least 12 months, the cost base is indexed for inflation from acquisition to sale instead of the gain being halved. Because of the 30 June 2027 market value reset described below, the discount is preserved on the value of goodwill and premises at that date; it is only growth after 1 July 2027 that gets indexation of the reset cost base instead of the discount. For a business started after 1 July 2027, goodwill built from nothing has a cost base near zero, indexation of near zero is near zero, and the discount’s disappearance is a straight loss. The 50% active asset reduction still applies to whatever gain remains.
A 30% minimum tax on the gain that is left. After losses, indexation and Division 152, the remaining gain for a resident individual is taxed at no less than 30%. The minimum is applied to what survives the concessions, so a gain fully absorbed by the retirement exemption is not touched.
The Act also deems post-CGT assets held by resident individuals (and by trusts with resident beneficiaries) on 30 June 2027 to be sold that day at market value and reacquired on 1 July 2027, with the notional gain deferred until the real sale and taxed under the old rules with the discount preserved and outside the 30% minimum. Pre-CGT assets of any entity are reset the same way and lose their exempt status. That is the mechanism that protects gains accrued before the change, and it means the value of your business at 30 June 2027 becomes the foundation of your eventual tax outcome. Treasury’s exposure-draft apportionment determination, released 3 August 2026 and not yet made, would let owners of real property and of assets without a readily ascertainable market value, which includes goodwill and shares in private companies, choose a growth-rate formula instead of an actual 30 June 2027 valuation. Whether the formula or a valuation gives the better answer is itself a modelling question, and for most trading businesses a contemporaneous valuation is the safer record to have. We covered the practical steps in our article on selling a medical practice before the 2027 changes; the same logic applies to any business.
So should you sell before 1 July 2027?
It depends almost entirely on whether you qualify for Division 152 today.
If you qualify for the 15-year exemption, the date does not matter for tax; sell when the business and the buyer are right. If you qualify for the active asset reduction and the retirement exemption and your gain is under roughly $2 million per owner, the concessions will usually reduce the tax to nil or close to it under either regime, and the deferred pre-2027 gain keeps its discount anyway. The pressure to sell early is mostly illusory for these owners, and selling into a buyer’s market in a hurry to beat a tax change that would not have hurt you is a bad trade.
If you do not qualify today, because your turnover is between $2 million and $10 million and your net assets exceed $6 million, the answer is the opposite of what most owners assume. Selling before 1 July 2027 gets you the 50% discount and nothing else. Selling after keeps the discount on the gain accrued to 30 June 2027, loses it on growth after that date, and adds the 50% active asset reduction on the whole gain. For an owner in that band, waiting is frequently better, not worse, and the 30% minimum only touches what survives the reduction. That is a modelling exercise, not a rule of thumb, and the answer changes with the mix of assets and the state of the market.
And if you are over the $10 million turnover line, no concession applies either way. The gain accrued to 30 June 2027 keeps its discount whenever you sell; growth after that date is taxed without it and at no less than 30%. For these owners the reform is a tax increase on future growth only, which argues for a sensible valuation at 30 June 2027 rather than a rushed sale before it.
Structure decides who gets the concessions
Sole trader or partnership. The simplest case. The individual owns the goodwill, the individual sells, the individual applies the concessions. The 15-year exemption and retirement exemption belong to you personally.
Company selling its business (asset sale). The company makes the gain and can apply all four concessions if it has a significant individual and, for the retirement and 15-year exemptions, CGT concession stakeholders; what it never gets is the general discount. Getting the money out to the shareholders is otherwise a second tax event, which is why the retirement exemption and 15-year exemption amounts, which can be paid out to stakeholders tax-free, are so valuable inside a company.
Shareholders selling the company (share sale). The shareholders make the gain, get the discount (until 2027), and apply the concessions if the company passes the 80% active asset test, the sellers are CGT concession stakeholders (or stakeholders together hold at least 90%), and, since 2018, the company itself passes the $2 million or $6 million test and the seller is carrying on a business or passes the $6 million test. Buyers generally prefer to buy assets, not shares, because they do not inherit the company’s history; sellers generally prefer to sell shares. The price usually reflects the difference.
Discretionary trust. The trust makes the gain and applies the concessions at trust level, needing a significant individual and, for the retirement and 15-year exemptions, CGT concession stakeholders; what is distributed to beneficiaries reflects those choices, and beneficiaries apply the discount to their share. From 1 July 2028 the proposed 30% minimum tax on discretionary trusts adds another layer, and the exposure draft’s three-year rollover relief for restructuring out of a discretionary trust runs from 1 July 2027 to 30 June 2030, which overlaps precisely with the window in which many owners will be planning a sale. Restructuring and selling are different transactions and doing them in the wrong order costs money.
The superannuation angle
The retirement exemption and the 15-year exemption amounts can be contributed to superannuation under the CGT cap, which is $1,935,000 for 2026-27 and separate from the ordinary non-concessional cap. For an owner over 55 with a full 15-year exemption on a $3 million gain, that is $1,935,000 into super with no tax on the way in and no impact on the $130,000 non-concessional cap. It is the largest single superannuation contribution most business owners will ever make.
The election is a form, and the timing is unforgiving: the CGT cap election must be given to the fund on or before the time the contribution is made, not later the same day. Given afterwards, the contribution is counted against the non-concessional cap, an excess contribution arises, and the fund is asked to release it. We have seen this happen because the settlement funds landed and the contribution was made the same afternoon, with the form signed the following week.
The other timing point is the 15-year exemption for a company or trust: the payment to the stakeholder needs to be made within two years of the CGT event (or six months after the last possible earnout payment) to be tax-free, and the stakeholder’s contribution to super under the CGT cap must be made within 30 days of receiving the payment. Deferred consideration makes both dates easy to miss.
Earnouts, GST and South Australian duty
Many business sales include an earnout: part of the price paid later depending on performance. Under the look-through rules, an earnout right that meets the conditions, including that all payments fall within five years after the end of the income year of the sale, is not a separate asset; each later payment is added to the proceeds of the original sale and the sale-year return is amended. The concessions are applied to the original gain, recalculated as payments arrive, which means the retirement exemption and CGT cap contribution can be topped up as earnout payments come in; each payment restarts the contribution deadlines and needs a fresh election before the contribution. An earnout with an extension clause that can push it past five years fails the look-through treatment entirely.
GST does not apply to the sale of a going concern where the buyer is registered or required to be, the parties have agreed in writing on or before completion that it is a going concern, everything necessary for the continued operation of the business is supplied, and you keep trading until completion. Get the written agreement into the contract, not the email chain.
Stamp duty is the good news. South Australia abolished duty on the transfer of business goodwill, intellectual property and other non-real business assets from 18 June 2015, and on non-residential, non-primary production land from 1 July 2018. A business sale in Adelaide that includes commercial premises is usually duty-free, which is not true across the border; one that includes residential or primary production land is not.
The mistakes we see
- Testing the net asset threshold at the wrong time. It is tested just before the CGT event, which for a contract sale is the contract date, not settlement. Assets acquired between contract and settlement are irrelevant; assets sold the month before drop out, but the proceeds you still hold are counted.
- Assuming the company gets the discount. It does not, and never has. A company can use all four small business concessions, but not the general discount.
- Forgetting the connected entities. The family trust’s commercial property, and any company you and your affiliates control 40% or more of, are counted in the $6 million; a spouse’s own assets are counted only where the spouse is your affiliate and the assets are used in the business. Owners are surprised by how quickly it adds up.
- Retirement that does not look like retirement. The 15-year exemption requires the sale to be in connection with retirement. A sale followed by a three-year full-time employment contract with the buyer, with no reduction in hours, is a hard case.
- Itemising a restraint of trade. Where a separate amount is allocated to a non-compete, that amount is a gain from creating a right: no discount, no indexation, and the small business concessions reach it only because the restraint is inherently connected with the goodwill being sold. Where no separate amount is allocated at arm’s length, the restraint is treated as ancillary to goodwill. Do not let the buyer’s lawyer split the price without your accountant seeing it.
- Leaving the CGT cap election until after the contribution. Described above; the most expensive paperwork error in the small business tax system.
What to do this year
Whether or not you intend to sell before 1 July 2027, three things are worth doing in the current financial year. Get an honest read on whether you pass the gateway tests today, including a rough net asset calculation across every connected entity. Fix the things that fail, which usually means dealing with surplus cash in a company or a passive asset in a trust, and doing it more than a year before any sale. And plan for a 30 June 2027 valuation of the business and any premises, because whether you use it or Treasury’s formula, the value at that date underpins your eventual tax outcome.
Talk to us
We advise Adelaide business owners on sale structuring, the small business CGT concessions and the superannuation contributions that follow, and we have been modelling the 2027 changes for clients since the legislation passed. If a sale is in your five-year plan, the conversation is worth having now rather than once a buyer is at the table.
You can read more on our business advisory page. Related guides: our article on choosing a business structure in Adelaide, our guide to selling a medical practice before the 2027 CGT changes, and our explainer on self-managed super funds.
Get in touch with our Adelaide team to talk through your sale.
This article is general information only and was prepared in September 2026. It does not take account of your objectives, financial situation or needs, and it is not tax, legal or financial product advice. The changes commencing 1 July 2027 are law but supporting guidance is still in draft, the 30% minimum tax on discretionary trusts is an exposure draft only, and the comparison of selling before or after 1 July 2027 is our own analysis that depends entirely on individual circumstances. You should obtain advice specific to your situation before acting.
