50% active asset reduction - capital gains tax concession for small business

This concession allows you to reduce the capital gain arising from a business asset (an active asset) by 50%.

To qualify for the 50% active asset reduction, you need to satisfy the basic conditions that apply to all the capital gains tax (CGT) small business concessions.

For more information about the basic conditions, see Capital gains tax (CGT) concessions for small business - overview.

There are other CGT small business concessions, in addition to this concession, that may apply to reduce your capital gain. You can apply as many concessions as you are entitled to until the capital gain is reduced to nil.

There are rules about the order you apply the CGT small business concessions, any current year or prior year capital losses and the CGT discount.

You can choose not to apply the 50% active asset reduction and go straight to either the Retirement exemption - capital gains tax concession for small business or the Rollover - capital gains tax concession for small business. This choice allows you to achieve the best tax result for your circumstances.

The 15 year exemption concession has priority over all the other concessions. If you qualify for the 15 year exemption, the entire gain will be exempt so you cannot use the 50% active asset reduction.

Example

Small business active asset reduction

Lana has a capital gain of $7,000 and qualifies for the small business 50% active asset reduction because the basic conditions are satisfied. She can, therefore, reduce her $7,000 capital gain by 50% as follows:

$7,000 - (50% x $7,000) = $3,500

Lana's net capital gain is $3,500. She may be able to reduce her capital gain further using the small business retirement exemption or the small business rollover.

More information

For information on the concessions available to small businesses, see: Guide to small business entity concessions For details of the capital gains tax concessions, see: Capital gains tax (CGT) concessions for small business - overview Guide to capital gains tax concessions for small business Advanced guide to capital gains tax concessions for small business For details of the individual concessions, see: Retirement exemption - capital gains tax concession for small business 15-year exemption - capital gains tax concession for small business Rollover - capital gains tax concession for small business