Do you have to worry about Capital Gains Tax?

Everything you need to know about Capital Gains Tax

Why every Business Owner should know if they have to pay CGT when selling their small business.

Many business owners aren’t sure of the issues and factors which can trigger a Capital Gains Tax (CGT) liability when a business is sold. Being properly advised and prepared will assist owners to be well-positioned when the time comes.

The CGT legislation is structured so that the owner of a small business who is well advised (and uses an appropriate business structure) should never have to pay CGT on the sale of their business. 


When do you have to pay Capital Gains Tax? 


Here are some points that help to simplify this potential minefield:


1. Business Ownership & Business Duration

Most income generating assets will attract CGT when sold, however, if certain conditions apply, a small business may not attract it when it's sold.

Many business owners are unaware that if an operating business is sold for less than five million dollars and it's owned by an individual, partnership, or company whereby an individual owns at least 50% of the business, or shares in the business, the CGT liability will be halved.

If the owner qualifies for this 50% reduction and has owned the business for more than 15 years, the sale will be free of CGT.

If a business is owned by individuals (not a company) for longer than twelve months, but less than 15 years, the CGT liability will be reduced by a further 50%. After the concession and discount is applied and the liability is established, a CGT liability can still be eliminated - if the operator is over 55 years of age, - as long as the gain is transferred to a complying superannuation fund, or if the operator reinvests the gain in another, similar, business within two years of the sale.


2. The "Involuntary sale”

Another way in which CGT may be exempt is in an "involuntary sale". For example, if the business is sold as a result of a compulsory acquisition, a marriage breakdown or an insurance payout, it's likely that no CGT will be applied.



Your best choice when it comes to CGT

We often find that business owners mistakenly believe that they will have to pay CGT when it’s likely that they’ll have no Capital Gains liability. We always suggest that business owners seek advice from a competent accountant.


A CGT liability is usually quite rare. And if there is such a liability it can be planned for in advance. So good advice is really valuable… and can save worrying about paying tax.


If you are looking for an experienced Accountant in Queensland, we recommend contacting the Team from Walsh Accountants:


Have a look at our Useful Links page to find Accountants we work with around Australia:



Written by Bruce Coudrey

Principal Benchmark Business Sales and Valuations



Bruce Coudrey has been Principal of Benchmark Business Sales & Valuations, since 1999. Benchmark is one of Australia’s largest national business brokerages. Bruce is a Registered Business Valuer and has acted as a court-appointed expert witness.