The small business 15-year exemption takes priority over the other small business concessions and the CGT discount. If the small business 15-year exemption applies, you entirely disregard the capital gain so there is no need to apply any further concessions.
If the 15-year exemption doesn't apply, you apply the CGT discount (if applicable) to the capital gain before applying the remaining small business concessions.
If you satisfy the conditions for more than one of the remaining small business concessions, you may apply each of those concessions to different parts of the capital gain.
After applying any capital losses, individuals and trusts eligible for both the CGT discount and the small business 50% active asset reduction can reduce a capital gain by 75% (that is, by 50% then 50% of the remainder).
The order in which you apply capital losses and the CGT concessions to capital gains is shown in the flowchart.
Example
Ken is a small business operator who sells an active asset that he has owned for more than 12 months. He makes a capital gain of $20,000. Ken also has a separate capital loss of $4,000. Assuming he satisfies all the conditions for the CGT discount and the small business 50% active asset reduction, Ken calculates his net capital gain as follows:
Capital gain |
$20,000 |
Deduct capital loss |
$4,000 |
Subtotal |
$16,000 |
Apply 50% CGT discount |
$8,000 |
Subtotal |
$8,000 |
Apply 50% small business active asset reduction |
$4,000 |
Reduced capital gain |
$4,000 |
Ken may be able to further reduce his $4,000 (reduced) capital gain using the small business retirement exemption and/or small business rollover if he satisfies the conditions for those concessions.
End of example