Applying the discount and concessions
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End of attention
The small business 15-year exemption takes priority over the other small business concessions and the CGT discount. If the small business 15-year exemption applies, you entirely disregard the capital gain so there is no need to apply any further concessions.
If the 15-year exemption doesn't apply, you apply the CGT discount (if applicable) to the capital gain before applying the remaining small business concessions.
If you satisfy the conditions for more than one of the remaining small business concessions, you may apply each of those concessions to different parts of the capital gain.
After applying any capital losses, individuals and trusts eligible for both the CGT discount and the small business 50% active asset reduction can reduce a capital gain by 75%, that is, by 50%, then 50% of the remainder.
See Order in which to apply the discount and concessions.
Ken is a small business operator who sells an active asset that he has owned for more than 12 months. He makes a capital gain of $20,000. Ken also has a separate capital loss of $4,000. Assuming he satisfies all the conditions for the CGT discount and the small business 50% active asset reduction, Ken calculates his net capital gain as follows:
Capital gain: $20,000
Capital loss: $4,000
Take the loss away from the gain
$20,000 - $4,000 = $16,000
Apply 50% CGT discount
$16,000 x 50% = $8,000
Apply 50% small business active asset reduction
$8,000 x 50% = $4,000
Reduced capital gain = $4,000
Ken may be able to further reduce his $4,000 (reduced) capital gain by using the small business retirement exemption and small business rollover if he satisfies the conditions for those concessions.
End of example
Last modified: 18 Mar 2015QC 39821