Capital gains
15-year exemption
The 15-year exemption is a small business CGT concession that can remove an entire capital gain on an active asset owned for at least 15 years by someone retiring or permanently incapacitated.
The 15-year exemption is one of the four small business CGT concessions, and in many ways it is the most valuable. If you qualify, the whole capital gain from the sale of an active business asset is disregarded. There is no need to reduce it step by step as with the other concessions, and generally there is no limit on how much gain can be exempt.
To qualify, you must first meet the basic conditions that apply to all the small business CGT concessions. That means you must be a small business entity, or pass the maximum net asset value test, and the asset must be an active asset. On top of that, you must have continuously owned the asset for at least 15 years, and the event must be connected with your retirement.
For an individual, the age and retirement test is that you are aged 55 or over at the time of the CGT event and the event happens in connection with your retirement, or that you are permanently incapacitated. Where a company or trust owns the asset, additional rules apply. The entity must have had a significant individual for the whole of the relevant period, and the person must meet the age or incapacity test.
The active asset requirement is a continuing one. The asset needs to have been an active asset for the whole period of 15 years, or if it is a share or trust interest, specific tests apply at various times. A building that was partly leased out to a third party for some of the period may fail the test, so the history of how the asset was used matters.
When a company or trust is involved, there are requirements about how the exempt amount is paid out to the individuals. Where the exemption applies to a share or interest, the exempt gain can in some cases be paid out, and a payment to a person under 55 may need to be contributed to super. These details are intricate, and getting them wrong can cause the exemption to fail.
The exemption deals only with CGT. It does not remove the need to consider GST on a sale of business property or goodwill, nor any income tax on trading stock. Keep careful ownership and usage records for the full 15 years. This is general information only, so confirm whether you qualify with the ATO or a registered tax professional.
Worked example
Raj bought a plumbing business in 2009 for $200,000 and sells it in 2025 at age 62, as part of his retirement, for $900,000, giving a capital gain of $700,000. The business assets were active assets for all 16 years of ownership. He meets the basic conditions, so he chooses the 15-year exemption and the entire $700,000 gain is disregarded, with nothing added to his taxable income.
Practical tips
- Keep records proving continuous ownership and active use for the full 15 years, because the ATO may ask for evidence.
- Check how the asset was used over time, since leasing part to an unrelated party can affect active asset status.
- If a company or trust owns the asset, get professional advice, since extra rules about payments and significant individuals apply.