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  • Step 6 Determine whether you qualify for the small business 50% active asset reduction

    Attention

    Warning:

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

    End of attention

    You can choose not to apply the 50% active asset reduction and go straight to the small business retirement exemption or rollover.

    Do you qualify?

    To qualify for the small business 50% active asset reduction on a capital gain, you need to satisfy only the basic conditions (see step 1).

    This means that if you satisfy the basic conditions you can reduce the capital gain by 50% (after applying any current year capital losses and any unapplied net capital losses from a previous year).

    If you are an individual or trust and both the CGT discount and the small business 50% active asset reduction apply, you reduce the capital gain by 50%, then 50% of the remainder - that is, a total of 75%.

    Example: small business 50% active asset reduction

    Lana qualifies for the small business 50% reduction because the basic conditions are satisfied. She can therefore reduce her capital gain by a further 50%, as follows:

    $7,000 − (50% × $7,000) = $3,500

    Lana may be able to reduce her capital gain further using the small business retirement exemption or the small business rollover.

    End of example

    More information:

    Last modified: 14 Jul 2020QC 17086