• Step 6 - Work out whether you may claim the 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 may choose not to apply the 50% active asset reduction and go straight to the small business retirement exemption or rollover.

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

    This means that, if you meet the basic conditions, you may reduce the capital gain by 50% after applying in the following order, any:

    • current year capital losses
    • 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 she meets the basic conditions. Therefore, she can reduce her capital gain by a further 50%, as follows:

    $7,000 - (50% x $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.

    Last modified: 28 Jun 2012QC 25843