Business owners get a $10 million CGT reprieve — but the $6 million test still picks the winners!

The active asset reduction now reaches businesses turning over up to $10 million. The concessions that actually wipe out the tax still sit behind the old $6 million net asset test — and that is where the planning has moved.

Business owners weighing an eventual sale picked up a meaningful concession on 18 June, when the Government lifted the turnover ceiling on the small business 50% active asset reduction from $2 million to $10 million. On the Treasurer's numbers, 2.7 million businesses — 98% of all active businesses — now sit inside it.

It is a rare piece of good news in a Budget cycle we have been openly critical of, and for genuine operating businesses it is worth real money on exit. But the change is narrower than the headline reads, and it does nothing to ease the test that does most of the damage to growing businesses: the $6 million maximum net asset value test.

What changed, and what didn't

The higher ceiling attaches to one concession only. The Prime Minister and Treasurer were specific — it is the 50% active asset reduction, the most widely used of the four small business CGT concessions, that picks up the $10 million threshold, aligning it with the turnover mark already used for the instant asset write-off. The reduction continues to apply on top of the general CGT discount.

The other three concessions are untouched. The 15-year exemption, the $500,000 retirement exemption and the small business rollover keep the gateway they have always had: aggregated turnover under $2 million, or net assets under $6 million. Practitioners working through the announcement in the days since have confirmed the point — nothing else moved to $10 million.

That distinction is the whole story, and most of the coverage has run straight past it.

To claim any of the four, you first clear the basic conditions in Subdivision 152-A: pass one of the two gateways — the turnover test or the $6 million net asset test — and satisfy the active asset test on what you are selling. Clear the gate, and depending on the asset and your age you can stack concessions until the assessable gain is small or nothing.

Why the $6 million test is the one that bites

The net asset value test reads like a simple arithmetic check and behaves like a trap. Just before the sale you total the net market value — assets less related liabilities — of the CGT assets of yourself, anyone connected with you, and your affiliates. Under $6 million, you pass.

Three things make it punishing for exactly the businesses these concessions are meant to reward.

It is measured the instant before you sell, when the business is worth more than it has ever been. Not averaged across the lean years you spent building it — taken at the top.

It counts the business you are selling. Goodwill is the part owners forget. Internally generated goodwill never appears on a balance sheet and costs nothing to build, but at sale it is often the largest single asset in the group, and it enters the test at full market value. Plenty of owners who picture their net worth as the gear in the shed and the cash at bank find the goodwill alone has carried them past $6 million.

And it aggregates. The net assets of connected entities and affiliates are pulled in — the bucket company holding retained profits, the unit trust that owns the premises, a second trading entity. The wealth a careful owner has built around the business, often on an accountant's advice, is frequently what tips the total over.

What stays out matters as much. The family home is excluded, provided it has not been used to earn income, and so is superannuation. For most business owners those are the two largest things they own, and both sit outside the test. That asymmetry is where the planning lives.

Under the old rules this set up a slow squeeze. Revenue scales quickly, so a good business cleared $2 million in turnover early. Enterprise value compounds more slowly, but it compounds — and the same business eventually sailed through $6 million in net assets as well. Both gates shut, often within a few years of each other, right as the business became worth selling.

A worked example: the same sale, three ways

Illustrative figures only — general information, not advice. Real outcomes turn on structure, eligibility and circumstances.

Take Justin. He runs a commercial mechanical and HVAC engineering business — capital-light, unglamorous, with deep goodwill and a book of blue-chip facilities clients. He holds the goodwill personally; the workshop sits in a connected unit trust and retained profits in a bucket company. He is 57, five years out from the sale he has always planned.

Option one — stay under $2 million. Justin keeps a lid on growth, turns away the larger contracts, and sells at around $1.9 million turnover for a goodwill gain of $1.6 million. His group's net assets are well under $6 million, so he clears both gates and stacks the full suite.

Step	Amount
Capital gain	$1,600,000
Less 50% general CGT discount	($800,000)
Less 50% active asset reduction	($400,000)
Less retirement exemption (within $500k lifetime cap)	($400,000)
Assessable gain	nil
Tax payable	nil

A clean result — on a business he deliberately kept small.

Option two — grow to $8 million, under the old rules. Justin backs himself, wins the larger work, and builds to roughly $8 million turnover. The business is now genuinely valuable, with a goodwill gain of $5 million on sale. But look at the net asset position just before the CGT event.

Net value of CGT assets (just before sale)	Amount
Goodwill (market value)	$5,000,000
Plant, equipment & vehicles (net of finance)	$450,000
Trade debtors & work in progress	$850,000
Workshop premises — connected unit trust (net of loan)	$1,400,000
Surplus cash & investments — connected bucket company	$300,000
Net value of CGT assets	≈ $8,000,000
Excluded: family home, superannuation, personal-use assets

At about $8 million he fails the $6 million net asset test, and at $8 million turnover he fails the $2 million test too. Under the old rules both gates are shut. None of the four concessions are available; only the general discount applies.

Step	Amount
Capital gain	$5,000,000
Less 50% general CGT discount	($2,500,000)
Assessable gain	$2,500,000
Tax at top marginal rates (47%, incl. Medicare)	≈ $1,175,000
After-tax gain	≈ $3,825,000

He is far wealthier than in option one — the business is simply worth more — but he has handed roughly $1.175 million to tax the concessions were meant to shelter, shut out by his own success.

Option three — grow to $8 million, under the new rules. Same growth, same $5 million gain, same $8 million net asset position. The turnover ceiling on the active asset reduction now sits at $10 million, so at $8 million turnover Justin walks through it regardless of his net assets.

Step	Amount
Capital gain	$5,000,000
Less 50% general CGT discount	($2,500,000)
Less 50% active asset reduction	($1,250,000)
Assessable gain	$1,250,000
Tax at top marginal rates (47%)	≈ $587,500
After-tax gain	≈ $4,412,500

The reform alone — nothing Justin did differently — saves $587,500.

But notice what he still does not get. Because he fails both the $2 million turnover test and the $6 million net asset test, the retirement exemption is out of reach. The higher ceiling opened the active asset reduction. It did nothing for the rest of Division 152.

The planning that's left on the table. Suppose Justin had managed his group's net asset position under $6 million ahead of the sale — drawing surplus cash out of the bucket company, carving out or restructuring the premises, watching the timing. Clear the net asset gate and the retirement exemption is back.

Step	Amount
Assessable gain (after both 50% reductions)	$1,250,000
Less retirement exemption (within $500k cap)	($500,000)
Revised assessable gain	$750,000
Tax at top marginal rates (47%)	$352,500

A further $235,000 saved — available only to the owner who treats the $6 million figure as a live constraint in the years before a sale, not a number they meet at settlement. Where both spouses qualify as CGT concession stakeholders, a second $500,000 cap can come into play and the benefit roughly doubles.

So the $10 million ceiling secures the active asset reduction whatever your net assets. The $6 million test still decides whether you also reach the exemptions that take the bill to zero.

Two caveats that matter

It is not law yet. The Treasurer says consultation on this measure is finished and the Government will amend the Bill now before the Senate to carry it. That is about as advanced as an announcement gets — but it is still an announcement.

The discount underneath it is changing. Every figure above uses today's 50% general CGT discount. From 1 July 2027 — separately, and among the Budget measures we regard as poor policy — that flat discount is slated to be replaced by cost-base indexation and a 30% minimum tax on net capital gains. The active asset reduction being expanded here survives, but after that date it would sit on top of an indexed gain rather than a halved one. For a low- or nil-cost-base asset like self-generated goodwill, indexation gives little or nothing — there is no real cost base to index — so a sale after 1 July 2027 loses that first 50% reduction altogether and leans on the active asset reduction alone. The timing of a sale either side of that date has become a real question in its own right.

The takeaway

This is less about the $10 million than the $6 million. The turnover cliff that quietly told owners to stay small is gone, up to $10 million, and the most-used concession comes with it. But the retirement and 15-year exemptions — the ones that turn a good outcome into nothing to pay — still sit behind the $6 million net asset test. Whether a growing business reaches them is settled in the years before a sale, across every connected entity, not on the day.

If a sale or succession is in view, that is the time to start planning now, while the net asset position can still be shaped. We will run it against your own numbers, alongside your accountant. Contact us if you'd like to discuss your exit strategy—we'll walk you through the details and help you plan and understand it.

This article is general information only and was prepared on 21 June 2026 based on Government announcements made on 18 June 2026. The measures described are proposed and not yet law, and the detail may change through consultation and the legislative process. The worked example uses fictional figures for illustration only; rates, thresholds and eligibility depend on individual circumstances. This is not personal financial or tax advice and does not consider your objectives, financial situation or needs. Seek advice tailored to your circumstances — and consult a registered tax agent on the tax detail — before acting.

Wealth Effect Group — Andre Dirckze is an Authorised Representative (AR 395157) of Boston Reed Ltd (AFSL 225738).