Smart ways to approach capital gains tax planning

Capital gains tax can be one of the largest costs your business faces when selling appreciating assets. The difference between reactive and proactive planning often means tens or hundreds of thousands of dollars staying in the business rather than going to the ATO.

Why Capital Gains Tax Planning Matters for Growing Businesses

Capital gains tax applies when your business disposes of an asset for more than its cost base. For medium-sized businesses, this typically surfaces when selling commercial property, business goodwill, shares in another entity, or during ownership restructures. The tax is calculated on the difference between what you paid and what you received, and without planning, it's taxed at your company rate or added to individual income. Timing the disposal, structuring ownership correctly, and using available concessions can significantly reduce what you pay. Consider a manufacturing business that purchased a commercial warehouse for $800,000 and sold it for $1.4 million during an expansion phase. Without planning, the $600,000 gain is fully taxable. With structured advice, that business might apply the small business CGT concessions, reduce the gain by 50%, or defer the liability through rollover relief, depending on how the sale is structured and what the proceeds are used for.

The Small Business CGT Concessions Most Owners Overlook

Four separate concessions exist for small and medium businesses, and they can be applied together. The 15-year exemption removes the entire capital gain if you've owned the asset for at least 15 years and are retiring or permanently incapacitated. The 50% active asset reduction halves the assessable gain. The retirement exemption allows up to $500,000 of the remaining gain to be disregarded if contributed to super or retained for retirement. The rollover allows you to defer the gain if you acquire a replacement active asset within two years. Eligibility depends on meeting the $6 million net asset test, the asset being active in the business for at least half the ownership period, and other conditions. Many business owners assume they don't qualify without actually testing the criteria. A logistics company selling a depot and reinvesting in a larger facility could apply the 50% reduction and the rollover, effectively deferring the entire tax liability until the new asset is eventually sold. That deferred tax becomes working capital for growth.

Structuring Ownership to Minimise CGT Exposure

How you hold assets determines how much CGT flexibility you have. Holding property or goodwill in a discretionary trust rather than a company gives you access to the 50% CGT discount for individuals, which companies don't receive. It also allows you to distribute the gain across multiple beneficiaries in lower tax brackets. Holding assets personally can work if you're eligible for the small business concessions, but it exposes you to personal liability. Holding in a company caps the tax rate at 25% or 30%, but you lose the 50% discount. The right structure depends on your growth plans, risk profile, and exit timeline. In our experience, businesses planning to sell within five to ten years benefit from restructuring early. Moving an asset from a company to a trust might trigger CGT now, but if the asset is appreciating and the sale is years away, the upfront cost can be lower than the CGT saved on exit. This kind of analysis requires modelling both scenarios with actual numbers, which is where tax planning becomes critical.

Timing the Sale to Align with Tax Outcomes

Selling in one financial year versus another can change your tax outcome significantly. If your business has a loss year, realising a capital gain in that year allows the loss to offset the gain. If you're planning to wind down operations or reduce income, deferring the sale to a lower-income year reduces the marginal rate applied to any gain that flows to individuals. Spreading a sale across two financial years can also reduce the marginal impact, though this depends on whether the contract allows for settlement to be split. A consulting business selling its client book and intellectual property might negotiate settlement in the following financial year if the current year already has high taxable income. That deferred settlement pushes the gain into a year where the business has lower revenue and can absorb the gain at a lower effective rate. The contract terms matter, because the ATO generally taxes the gain when the contract is signed, not when you receive the money, unless settlement is genuinely deferred.

Using Rollovers to Defer CGT When Restructuring

Rollover relief allows you to defer a capital gain when transferring assets between related entities or acquiring replacement assets. This is particularly useful during ownership restructures, bringing in new partners, or consolidating operations. The gain isn't forgiven, but it's deferred until the asset is eventually disposed of outside the rollover conditions. Same-asset rollover applies when transferring an asset to another entity you control, such as moving property from a company to a trust. Replacement-asset rollover applies when selling an active asset and buying another one to continue the business. Both require specific conditions to be met, and the ATO will disallow the rollover if it's used purely for tax avoidance without commercial purpose. A family-owned distribution business restructuring ahead of succession transferred its warehouse and fleet from individual ownership into a discretionary trust. The rollover deferred the CGT that would have been triggered on transfer, preserved the small business concessions for future use, and created a structure that allowed income splitting and asset protection as the next generation took over.

Contributions to Superannuation as a CGT Strategy

If you're over 55 and selling assets, contributing capital gains to superannuation can reduce or eliminate the tax. The retirement exemption allows up to $500,000 of a capital gain to be disregarded if you contribute it to super. Contributions must go into a complying fund, and if you're under preservation age, the amount is subject to the usual contribution caps. Once in super, the tax rate is 15% on concessional contributions or zero if it's treated as a non-concessional contribution under the exemption. This is often used alongside other concessions. For a business owner selling a commercial property and applying the 50% active asset reduction, the remaining gain can then be sheltered through the retirement exemption. That combination can bring the effective CGT rate close to zero, provided the asset qualifies and the contribution limits are managed correctly. Timing the sale to align with your super strategy requires coordination between your accountant, financial planner, and SMSF trustee.

When to Review Your CGT Position

Your CGT exposure changes as your business grows. Reviewing your position makes sense when you acquire appreciating assets, restructure ownership, bring in or exit partners, or plan a sale in the next few years. Waiting until you're ready to sell limits your options. Depreciation claimed over the years gets added back to the cost base calculation, previous restructures might affect rollover eligibility, and the structure you set up a decade ago might no longer suit your circumstances. Annual tax planning should include a CGT review, especially if you hold property, intellectual property, or equity in other businesses. The cost of advice is usually a fraction of the tax saved, and the earlier you plan, the more options you have. Segue Advisory Group works with medium-sized businesses across Australia to model CGT scenarios, structure ownership for growth, and align disposal timing with your commercial and personal goals. If you're holding appreciating assets or considering a sale in the next few years, a proactive conversation now can reshape your tax outcome.

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