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Home / Super booster / Super contributions / The small business CGT retirement exemption explained

The small business CGT retirement exemption explained

Penny PryorPenny Pryor

If you are a small business owner looking to use the capital built up in your business to help fund your retirement, you’re in luck. There are two capital gains tax (CGT) exemptions with the potential to boost your super when you sell your business assets.

These concessions generally apply to any active asset your business owns and sells at a profit, provided your annual turnover is below $2 million.

Using business sale proceeds to boost your super

As mentioned above, there are two CGT exemptions available to business owners who want to give their super a shot in the arm. 

There is the small business 15-year exemption, which exempts the capital gain on the sale of a business asset you have owned for at least 15 years if you are aged 55 or over and are retiring or if you are permanently incapacitated (at any age). These sale proceeds can be contributed to your super and are generally a non-concessional contribution. To exclude the amount from your non-concessional contributions cap and have it count towards your CGT cap amount instead ($1,780,000 for 2024–25), you must notify your super fund.

If you are eligible for the 15-year exemption, you must choose to apply it and your entire capital gain will be tax free. 

Read more about the 15-year CGT exemption.

Then there’s the small business retirement exemption that can be applied if you are not eligible for the 15-year exemption.

For this exemption the business owner can disregard up to $500,000 of capital gains when they dispose of an active asset. There is no age limit on when you can take advantage of this exemption, but if you are under 55 you must contribute the amount into a super fund and you can only make contributions to super up to age 75.

Business owners can choose to disregard all or part of a capital gain under this exemption.

This article deals with the small business retirement exemption.

How does the small business retirement exemption work?

When you sell an active business asset and make a capital gain, a decision must be made as to what to do with that gain once any capital losses are also applied.

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About the author

Penny Pryor
Penny Pryor
Penny has nearly two decades experience of writing, reporting and editing financial services publications for both institutional and retail readers. She has contributed to, and edited, the Money Section of the Sun Herald and The Sunday Age. She has written for the Australian Financial Review and the Sydney Morning Herald, the Cooperative Research Centres Association publication KnowHow Magazine, JMoney, In The Black and Global Investor.
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Responses

  1. Terry Bennett Avatar
    Terry Bennett

    Can you please clarify on whether the 75 year age limit applies to the Retirement exemption. At the beginning of the article you state there is no age limit, but later on state that after 75 you cannot contribute. thanks

    1. SuperGuide Avatar
      SuperGuide

      Thank you for your question.

      There is no age limit to apply for the exemption, but ATO says that if at the time you apply for the exemption you are under 55, you must make the contribution into super. However, the age limit of 75 applies to the general rule of not being able to make non-concessional super contributions. Also, as per ATO, if you are older than 55 when you make the choice to access the retirement exemption, there is no requirement to pay any amount to a complying super fund or RSA, even though you may have been under 55 years old when you received the capital proceeds.

      So, age 55 and age 75 are two different aspects.

      Please note, this is factual information only. You can refer to more information on the ATO website.

      Best wishes
      The SuperGuide team

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