Retirement exemption - capital gains tax concession for small business

This concession can exempt a capital gain on a business asset, up to a lifetime retirement exemption limit of $500,000. For an individual choosing the retirement exemption, there is no requirement to terminate any activity or cease business. This concession allows you to provide for your retirement.

There are other capital gains tax (CGT) small business concessions, in addition to this concession, that may also 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. This allows you to achieve the best tax result for your circumstances.

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.

Basic conditions

To qualify for the small business retirement exemption you must satisfy the basic conditions that apply to all the CGT small business concessions. You must then satisfy the additional conditions that apply specifically to the retirement exemption.

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

Additional conditions

If you are a sole trader or a partner in a partnership, you can use the small business retirement exemption to exempt all or part of a capital gain if:

• the amount you are choosing to be exempt does not exceed your remaining CGT retirement exemption limit. An individual's lifetime CGT retirement exemption limit is $500,000. Your $500,000 limit is reduced by any previous amounts you have chosen to be exempt under the retirement exemption. The amount you choose to exempt is called your exempt amount, and
   
• you contribute the exempt amount into a complying superannuation fund or retirement savings account (RSA) if you were aged under 55 years just before you chose to use the retirement exemption. If you were aged 55 or more just before you chose to use the retirement exemption, you don't have to pay any amount into a complying superannuation fund or RSA, even though you may have been under 55 years when you received the capital proceeds.

There are different additional conditions if the asset was owned by a company or a trust.

You must keep a written record of the amount you have chosen to exempt (the exempt amount).

More information

Capital gains tax (CGT) concessions for small business - overview 50% active asset reduction - capital gains tax concession for small business 15  year exemption - capital gains tax concession for small business Roll over - capital gains tax concession for small business Guide to capital gains tax concessions for small business Advanced guide to capital gains tax concessions for small business Small business entity concessions - home