Basic conditions



This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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The basic conditions are contained in Subdivision 152-A of the Income Tax Assessment Act 1997.

To qualify for the small business CGT concessions, you must satisfy several conditions that are common to all the concessions. These are called the 'basic conditions'.

The Tax Laws Amendment (Small Business) Act 2007 (80 of 2007) introduced changes to the basic conditions, effective from the 2007-08 income year. For a summary of the changes or for information relating to CGT events happening in the 2006-07 and earlier years refer to our website

From the 2007-08 income year, an alternative eligibility test applies, the small business entity test. If you do not satisfy this test, you may still be eligible for the small business CGT concessions if you satisfy the maximum net asset value test. The threshold for this test has been increased to $6 million.

Each concession also has further requirements that you must satisfy for the concession to apply (except for the small business 50% active asset reduction which applies if the basic conditions are satisfied).

Follow the steps below to determine if you satisfy the basic conditions:

Step 1

You must first satisfy one of the following:

  • you are a small business entity for the income year
  • you satisfy the maximum net asset value test which sets a $6 million limit on the net value of CGT assets that you and certain entities can own (subject to a number of exclusions), or
  • you are a partner in a partnership that is a small business entity for the income year and the CGT asset is an asset of the partnership.

Changes to the capital gains tax concessions for small business received royal assent on 23 June 2009 and are contained in Tax Laws Amendment (2009 Measures No. 2) Act 2009.

These changes increase access to the small business CGT concessions with effect from the 2007-08 income year for:

  • taxpayers who own a CGT asset used in the business of a related (affiliate or connected) entity, and
  • partners who own a CGT asset used in the partnership business.

For more information refer to:

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Step 2

The asset in question must satisfy the active asset test.

Step 3

This step is only applicable if the CGT asset is a share in a company or interest in a trust. Where this is the case one of these additional basic conditions must be satisfied just before the CGT event:

  • the entity claiming the concession must be a CGT concession stakeholder in the company or trust, or
  • CGT concession stakeholders in the company or trust together have a small business participation percentage in the interposed entity of at least 90% (the 90% test).
Last modified: 30 Jun 2009QC 27964