Capital Gains Tax When You Sell Your Business: The Rules, the Concessions and the 2027 Change

In The Subscription Playbook I wrote about the business owner's dream.

You build something that supports your lifestyle. Then, when it's time to retire, you sell it and live off the proceeds.

For a lot of owners, that dream never comes true, because the business can't be sold for what they believe it's worth. That's the first heartbreak, and it's why I wrote the book.

There's a second one I see less often, but it hurts just as much. An owner does the hard work, builds recurring revenue, finds a buyer and gets a great price. Then they find out how much tax they'll pay, and that some of it could have been avoided with a year of planning.

This guide is about avoiding the second heartbreak.

It's general information as at October 2026, not tax advice. CGT on a business sale depends on your structure, your history and exactly what you sell. The 2027 reforms are also new, and some details are still being settled. Talk to a registered tax agent before you sign anything.

Does CGT apply when you sell a business?

Generally, yes.

When you sell a business, you're usually disposing of CGT assets: goodwill, intellectual property, customer contracts, sometimes equipment and property. Or, in a share sale, the shares themselves. A capital gain is broadly the price you receive for an asset, less its cost base.

For subscription businesses, goodwill is usually the big one. It's the value of your customer base, your brand and the annual recurring revenue a buyer expects to keep.

Here's the catch. If you built the business yourself, your goodwill probably cost you very little in CGT terms. A cost base close to zero means almost the whole price is a gain.

How is CGT calculated on a business sale?

Broadly, in this order:

1. Work out the capital gain on each asset: capital proceeds less cost base.
2. Apply the 15-year exemption first, if you qualify. If it applies, the gain is disregarded and you stop.
3. Subtract capital losses (current year and carried forward).
4. Apply the 50% CGT discount, if you're an individual or trust and held the asset for at least 12 months. (For gains accruing from 1 July 2027, see below.)
5. Apply the 50% active asset reduction, if eligible.
6. Apply the retirement exemption or roll-over, if eligible.

What's left is added to your assessable income and taxed at your rate (or the company's, or flows through the trust).

What are the small business CGT concessions?

These four concessions are the most valuable tax relief most business owners will ever use. The Treasurer confirmed in the May 2026 second reading speech that "the 4 existing small business CGT concessions will remain in place."

The basic conditions

To use any of them you first need to pass the basic conditions. In summary:

• Size: you're a CGT small business entity (aggregated turnover under A$2 million), or you pass the maximum net asset value test (net CGT assets of you, connected entities and affiliates of A$6 million or less, just before the sale);
• Active asset: the asset was used in carrying on a business for long enough during your ownership (the ATO's active asset test sets out the detail);
• Shares and trust interests: extra conditions apply if you're selling shares or units rather than the business assets.

Those thresholds have been unchanged for a long time. In June 2026, Treasury's small business explainer said the turnover threshold for the 50% active asset reduction is increasing from A$2 million to A$10 million from 1 July 2027, with the other concessions keeping their existing tests. Check the final position with your adviser, because the exact drafting matters.

What changes on 1 July 2027?

This is the biggest change to CGT in decades, so it's worth getting right.

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 received assent on 26 June 2026. For individuals, trusts and partnerships, it replaces the 50% CGT discount with:

• cost base indexation, so you're taxed on gains above inflation; and
• a 30% minimum tax rate on capital gains, with exemptions for recipients of certain government payments, such as the Age Pension and JobSeeker.

Key points for business owners:

• It's prospective. Gains that accrued before 1 July 2027 keep the 50% discount, whenever you sell. Treasury's explainer says business value built up before that date keeps the old treatment.
• You'll need a value at 1 July 2027. The Act treats assets held at that date as if sold and reacquired just before 1 July 2027 at market value, unless you use an apportionment method that the Minister can set. The resulting gain is deferred until you actually sell.
• Companies aren't affected by the indexation and minimum tax changes. They never had the 50% discount.
• Super funds keep their existing one-third discount, according to Chartered Accountants ANZ.
• The small business concessions stay.

Why indexation is cold comfort for built-up goodwill

Indexation increases your cost base in line with inflation. That's useful if you paid a lot for an asset.

But if your goodwill has a cost base of close to zero, indexing zero still gives you about zero. For many founders, the indexation half of the new system provides little relief, and the 50% discount on post-2027 gains is gone.

The government knows this. In the second reading speech, the Treasurer said it is consulting on "the treatment of capital gains of small and start-up businesses where indexation is applied to a low or zero cost base." As at October 2026, that consultation hadn't produced final law that I could find. That's one of several reasons the concessions, and a valuation at 1 July 2027, matter so much.

A worked example: same sale, three outcomes

These numbers are illustrative. They assume the owner meets every condition, which you must confirm with an adviser.

Same business. Same price. Very different results.

Does it matter how your business is structured?

Enormously. Who owns the business decides which rules apply.

Restructuring has tax costs of its own. Don't move assets around because of a headline. Model it first.

What should you do before 1 July 2027?

If a sale is likely in the next five years, I'd do these six things now.

1. Get your structure reviewed. Know who owns what, and whether it still suits a sale.
2. Confirm concession eligibility. Turnover, net assets, active asset history, and for shares, the extra conditions.
3. Get a market valuation as at 1 July 2027. You'll need one to separate pre-2027 and post-2027 gains. (My guide on how to value a SaaS business shows what a valuer will look at.) A credible valuation is evidence. A guess is an argument.
4. Keep records. Cost base, purchase documents, improvements, and when assets became active.
5. Model the timing. Selling before 1 July 2027 isn't automatically better, but you should know the difference in dollars.
6. Don't let tax drive the business decision. The best tax outcome on a bad sale is still a bad sale.

What raises the price matters as much as the tax

It's tempting to focus only on tax. But every dollar of valuation you add before a sale is worth more than most tax planning.

In the book I show how a typical small business sells for about 0.67 times revenue, while strong subscription businesses can be valued on recurring revenue at much higher multiples. Lower churn, better retention, less dependence on you and clean compliance with Australia's new subscription rules all lift the price. My guide to selling a subscription business in Australia covers the process, and valuing an Australian SaaS business covers what buyers pay for.

Run your own numbers through the estimator to see where you might land.

What to do next

1. Write down who owns the business today, and what you'd sell: assets or shares.
2. Estimate your capital gain: likely price less cost base.
3. Check the basic conditions for the small business concessions.
4. Book a valuation conversation for mid-2027.
5. Work through the selling a business checklist so nothing surprises you at due diligence.

And for the broader picture of running a subscription business here, start at the Australian hub.

Free Subscription Profit Review

Australian business owners can book a free 30-minute review with a BPAG Accountants adviser. An honest conversation about:

• whether a subscription model could work for your business
• how recurring revenue could cover your fixed costs each month
• how it could lift what your business is worth

Book my free review Call 1300 272 422

No cost, no obligation. General information only until we understand your situation.

Frequently asked questions

General information only, current as at October 2026. It isn't legal, tax or financial advice and doesn't consider your circumstances. Speak to a qualified adviser before acting.

Robert Coorey, MBA

Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.