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.
Example: CGT discount
After offsetting her $3,000 capital losses against her $17,000 capital gain, Lana is left with a capital gain of $14,000. As she is eligible for the CGT discount, she can reduce the remaining capital gain by 50%, as follows:
$14,000 – (50% x $14,000) = $7,000
Lana may be able to reduce her capital gain further using one or more of the other small business CGT concessions.
End of exampleIf the capital gain is from a depreciating asset, you cannot use any of the small business CGT concessions to reduce the gain any further. If it is not from a depreciating asset, you may be able to reduce your capital gain further under the remaining small business CGT concessions.
Example: depreciating assets
The land that Lana disposed of was not a depreciating asset, so she can use the remaining small business CGT concessions to reduce her capital gain if she meets the relevant conditions.
End of exampleIf 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.
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
Capital loss: $4,000
Take the loss away from the gain
$20,000 - $4,000 = $16,000
Apply 50% CGT discount
$16,000 x 50% = $8,000
Apply 50% small business active asset reduction
$8,000 x 50% = $4,000
Reduced capital gain = $4,000
Ken may be able to further reduce his $4,000 (reduced) capital gain by using the small business retirement exemption and small business rollover if he satisfies the conditions for those concessions.
End of example