Tax when you sell a business in Australia: what happens to the money

You will pay capital gains tax on the gain, unless one of the four small business concessions applies to you. That is the short answer and we set it out below.

The longer answer is the one that matters, and almost nobody writes it down.

Your tax bill is calculated on what you receive and when you receive it, which is not the same thing as the price you agreed. Those two things are set by the shape of the deal, and the shape of the deal is set by how much of the business is you.

That is our view, from sitting on the sell side of these conversations. The tax is the last thing to be decided and the first thing owners ask about.

Why the deal shape decides your tax, not the other way round

A buyer looking at an owner-led business is doing one calculation above all others: what happens here if this person leaves.

If the answer worries them, they do not walk away. They restructure. Instead of cash at settlement they offer some cash now, some held back, some paid over two or three years if the business performs. They may ask you to stay on for a period. They may ask you to carry part of the price yourself.

Every one of those changes when money reaches you. Some of it lands in this financial year, some in the next, some only if targets are met. Your accountant then has to work out the position for a payment stream rather than a single amount, and the concessions you were counting on may fall in a different year to the one you assumed.

The owner who has spent three years making the business run without them does not have this problem, because the buyer had no reason to hold anything back.

Same headline price. Different money, in a different order, taxed differently.

What tax do you pay when you sell a business in Australia?

Capital gains tax, in most cases.

Not everything in the sale is treated the same way. The ATO notes that depreciating assets such as business equipment are generally exempt from CGT unless used for a private or other non-taxable purpose, and are handled through your income tax as balancing adjustments instead.

The date that matters is not the one most owners assume:

So the clock runs from the day you sign, not the day the money arrives. A contract signed in late June that settles in July puts the CGT event in the earlier financial year.

What are the four small business CGT concessions?

There are four: the 15-year exemption, the 50% active asset reduction, the retirement exemption, and the roll-over.

To use any of them you have to be an eligible entity and the asset has to pass the active asset test. The ATO sets out four ways to be an eligible entity, including aggregated turnover of less than $2 million and the maximum net asset value test, so a business above the turnover figure is not automatically out.

One of those numbers moves, and only for one of the four. Treasury's small business explainer states:

That is easy to take as a general lift, and it is not one. Treasury names the 50 per cent active asset reduction and no other concession. Treasury's own figures make the same distinction: all 2.7 million active small businesses will be eligible for the 50 per cent active asset reduction, while over 90 per cent are eligible for all four. A business sitting between those two figures may find one door opens without the others moving. our guide to the 2026 CGT reforms covers the wider package.

Three of the four you have to choose. The 50% active asset reduction applies on its own if you meet the basic conditions. The ATO states the choice for the other three must be made before you lodge your return for the year the CGT event happened, and for the retirement exemption you also have to keep a written record of the amount you disregard.

There is a set order for applying them. our guide to the small business CGT concessions walks through it, and the 15-year exemption and the retirement exemption have their own guides.

Does a company get a 50% CGT discount?

No. The ATO is unambiguous about this:

The ATO also states that complying super funds reduce their capital gain by 33.33%, and that to qualify for the discount at all the asset must be owned for at least 12 months before the CGT event.

This catches people out because the CGT discount and the small business 50% active asset reduction are two different concessions that both happen to be 50%. A company can be shut out of one and still use the other. They are applied at different steps and eligibility is assessed separately, which is why the entity holding the asset changes the number.

How do I avoid capital gains tax when selling a business?

You generally do not. The ATO's own words are disregard or defer.

Our view: an owner who spends the last year before a sale hunting for tax reductions is working on the smallest variable available to them. The concessions are tests. You either meet them or you do not, and the facts that decide it, how long you have held the asset, how it has been used, how the business is structured, were set years ago.

The variable still open is what the buyer is willing to pay you and how much of it they are willing to hand over at settlement. That is worth more than any concession, and it is the only one that responds to work.

What your accountant means by "it depends on the structure"

Most owners hear that and think of their company structure. Trust or company, who holds the shares, when it was set up.

It also means the structure of the deal. Cash at settlement or paid over three years. Fixed price or conditional on performance. Assets or shares. Whether you stay on afterwards.

Your company structure is largely fixed by the time you are selling. The deal structure is not, and it moves according to how confident the buyer is that the business works without you.

That is the part we work on, and it is the reason we talk about time. Three years of preparation changes what a buyer offers. Three months of tax planning changes the arithmetic on an offer you have already been handed.

Frequently asked questions