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CGT concessions on passively-held assets

Details of the conditions you must meet to claim CGT concessions on passively-held assets.

Last updated 5 June 2023

To claim CGT concessions on passively-held assets, you must meet the following conditions:

  • Your affiliate or entity connected with you is a small business entity for the same income year that the CGT event happens to your CGT asset.
  • In the income year that the CGT event happens to your asset, the same affiliate or entity connected with you must
    • be using the asset in their business
    • be a small business entity, and
    • the asset must meet the active asset test for the same time.
  • You don't run a business in the income year other than in a partnership. If you run a business in a partnership, the CGT asset cannot be your interest in a partnership asset.

In determining whether the entity that uses the passively-held asset is a small business entity, there's a special rule for calculating aggregated turnover. To calculate the aggregated turnover of the small business entity, you must include the turnover of your affiliates or entities connected with you. Calculating aggregated turnover is otherwise the same.

An entity that is your affiliate or connected with you, is deemed to be an affiliate of, or connected with the small business entity that uses the asset. There is a special affiliate rule for spouses and children under 18.

Example: passively-held asset eligible for CGT concessions

Palik owns land that she leases to a company she wholly owns, Fossy Farm Pty Ltd. Fossy Farm Pty Ltd uses the land in its farming business.

The aggregated turnover of Fossy Farm Pty Ltd is $1.8 million.

Palik does not run a business herself.

Palik can access the small business CGT concessions in relation to the disposal of the land because:

  • Palik does not run a business
  • Fossy Farm Pty Ltd, as a connected entity that uses the land to run their business, has an aggregated turnover less than $2 million.
End of example

Superannuation funds cannot claim CGT concessions

The small business CGT concessions are not available for any capital gain a superannuation fund makes on the sale of an asset used in a related entity's business.

For example, a super fund may own premises used in the business of a related entity. However, as the members or trustees of the fund (who typically also control the related entity) don't control the fund as required, the related entity is not a connected entity. Therefore, the business property is not an active asset.