After years — sometimes decades — building a trade business from nothing, selling it is one of the biggest financial events of your life. Get the tax right and you could walk away with hundreds of thousands of dollars more. Get it wrong and the ATO takes a far larger slice than necessary.

This guide covers how Capital Gains Tax (CGT) applies to the sale of a trade business, the four Small Business CGT Concessions that can dramatically reduce your tax bill, and what you need to do before listing the business to maximise your after-tax proceeds.

What Are You Actually Selling?

When a tradie sells their business, they're typically selling a combination of:

  • Goodwill — the value of your reputation, client relationships, brand
  • Physical assets — plant, equipment, vehicles, tools
  • Intellectual property — business name, website, systems, procedures
  • Stock and materials on hand — inventory
  • Work in progress — contracted jobs not yet completed
  • Liabilities assumed by the buyer — debts taken over (reduce the sale price)

Each component may be taxed differently. Physical assets that have been depreciated may trigger a "depreciation recapture" event. Goodwill is typically a capital asset attracting CGT concessions. Work in progress is ordinary income.

The purchase price allocation — how you and the buyer agree to split the sale price between these components — has significant tax consequences. Never leave this to chance or purely to the buyer's preference.

Capital Gains Tax Basics for Business Sales

CGT is triggered when you sell a capital asset — typically goodwill, real property, and some equipment — for more than its cost base.

Capital Gain = Sale Proceeds – Cost Base

For goodwill in a trade business, the cost base is typically the cost incurred to develop it — often nominal (you didn't pay to develop your reputation, it developed over time). This means the sale proceeds attributable to goodwill are almost entirely a capital gain.

Example:

  • Sale price attributable to goodwill: $200,000
  • Cost base of goodwill: $5,000 (legal costs, brand registration)
  • Capital gain before concessions: $195,000

Without concessions, at a 32.5% marginal rate (plus Medicare Levy 2%), this could cost $66,690 in tax. With the small business CGT concessions applied correctly, the tax can be reduced to zero.

The Four Small Business CGT Concessions

These are the four most powerful tax tools available to Australian small business owners exiting their businesses. They can reduce or eliminate CGT entirely — but eligibility conditions must be met.

Basic Eligibility Conditions

To access any of the four concessions, you must satisfy both of these tests:

1. The Small Business Entity Test:
Your aggregated annual turnover must be under $2 million in the year of sale (or the previous year in some circumstances).

2. OR the Net Assets Test:
Your net assets (assets you and your associates own, excluding superannuation and main residence equity up to $6 million) must be under $6 million.

Most tradie businesses will qualify under one or both tests.

Concession 1: The 15-Year Exemption

If you've owned the business for at least 15 years and you're aged 55 or over (or are permanently incapacitated), the entire capital gain from the sale is completely exempt from CGT.

You can contribute up to $1,705,000 (2025–26 cap, indexed) from the exempt amount into superannuation as a non-concessional contribution — tax-free. This is outside the normal super contribution caps.

Example: A 58-year-old plumber sells his business after 17 years. The capital gain on goodwill is $380,000. Under the 15-year exemption:

  • Capital gain: $380,000
  • Tax: $0
  • He can contribute up to $380,000 into super under the retirement exemption (see below)

This is the most powerful concession — but requires patience. Many business owners who sell before 15 years miss this entirely.

Concession 2: The 50% Active Asset Reduction

The active asset reduction halves the capital gain before other concessions or the general 50% discount applies.

To qualify:

  • The asset must have been an "active asset" — used in your business — for more than half the period you owned it (or at least 7.5 years for assets owned more than 15 years)
  • Goodwill is automatically an active asset
  • Business equipment and vehicles used in the business qualify

Effect:
Capital gain of $200,000 → reduced to $100,000 after the 50% active asset reduction.

This concession can be applied regardless of age or years owned, as long as the basic eligibility conditions are met.

Concession 3: The Retirement Exemption

If you sell a business asset and use some or all of the proceeds for retirement, you can exempt capital gains of up to $500,000 per lifetime.

Conditions:

  • If you're under 55, the exempt amount must be contributed to superannuation
  • If you're 55 or over, the exempt amount can be kept outside super (you can "retire" even if not literally retiring)
  • The $500,000 is a lifetime cap — once used, it's gone

Example: A 52-year-old electrician sells her business. After the 50% active asset reduction, her capital gain is $350,000. She elects to use the retirement exemption for $350,000 and contributes this amount to her super fund. Capital gain tax: $0.

Concession 4: The Small Business Rollover

If you're reinvesting the sale proceeds into a new replacement asset or new business entity, you can roll over the capital gain — deferring (not eliminating) the tax.

The gain is deferred for 2 years from the sale, or until you sell the replacement asset — whichever is first.

When is this useful?

  • You're selling one trade business to buy another
  • You're restructuring (selling out of a sole trader to a company)
  • You need time to decide on your retirement strategy

This is the least common concession for tradies genuinely exiting — it's more useful for those transitioning to a different business, not fully retiring.

Stacking the Concessions — Maximum Tax Reduction

The power of these concessions is that they can be applied in combination ("stacked"):

Maximum stacking strategy:

  1. Apply the 50% active asset reduction → halve the capital gain
  2. Apply the general 50% CGT discount (if held the asset for more than 12 months) → halve again
  3. Apply the retirement exemption (up to $500,000) → eliminate the remaining gain

Example:

  • Capital gain before concessions: $800,000
  • After 50% active asset reduction: $400,000
  • After 50% general CGT discount: $200,000
  • Apply retirement exemption ($200,000 < $500,000 cap): $0 taxable gain

A capital gain of $800,000 → zero tax, with $200,000 going into superannuation.

The 15-year exemption is even more powerful — it exempts the entire gain without needing to stack, and allows a larger super contribution.

Before You Sell: Tax Planning Checklist

5+ Years Before Sale

✅ Start tracking the 15-year ownership period
✅ Ensure the business entity structure is appropriate (a trust or company sale may be more tax-effective than a sole trader sale)
✅ Build goodwill systematically — document systems, lock in client contracts, develop a recognisable brand
✅ Ensure business assets are clearly separated from personal assets

2–3 Years Before Sale

✅ Clean up the financial records — 3 years of clean, professionally prepared accounts are a buyer requirement
✅ Document all systems and processes — this increases goodwill value and sale price
✅ Reduce personal expenses through the business — buyers' accountants will scrutinise this
✅ Brief your accountant on the plan — tax optimisation requires time, not last-minute decisions

12 Months Before Sale

✅ Confirm your eligibility for small business CGT concessions with your accountant
✅ Decide on the purchase price allocation strategy (how the sale price is split between goodwill, equipment, work in progress)
✅ Consider whether to sell assets or shares (if trading through a company)
✅ Get a business valuation to understand the realistic sale range
✅ Consult a financial planner about super contribution strategy before the sale settles

What Makes a Trade Business Worth More

The difference between a trade business selling for 1× revenue and 2× revenue is almost entirely about how systematised and transferable it is.

High-value factors:

  • Long-term client contracts and service agreements
  • Trained staff who will stay with the business under new ownership
  • Documented systems and processes (job management, quoting, safety)
  • A business name and brand that isn't reliant on the owner's personal reputation
  • Consistent, growing revenue over 3+ years
  • Strong online reputation (Google reviews, website, social proof)

Low-value factors:

  • All client relationships are personal to the owner
  • Revenue disappears if the owner leaves
  • No documented systems — everything is "in the owner's head"
  • Declining revenue trend
  • Key staff likely to leave after the sale
  • Significant deferred maintenance on equipment

The investment in building a more valuable business 2–3 years before sale almost always exceeds the sale price uplift it generates.

Asset Sale vs Share Sale

If your business operates through a company, you can sell either the company's assets or your shares in the company.

Asset sale (more common):

  • Buyer purchases individual assets (goodwill, equipment, etc.)
  • You (the company) receive the proceeds
  • Tax on the capital gain is at the company level, then dividends taxed at personal level when extracted
  • Generally less favourable for the seller

Share sale:

  • Buyer purchases your shares in the company
  • You personally receive the proceeds
  • CGT applies at your marginal rate (with 50% discount if held 12 months+)
  • Small business CGT concessions can apply directly to you
  • Generally more tax-effective for the seller

Most buyers prefer asset sales (they get clean assets without inheriting the company's liabilities and history). Most sellers prefer share sales. The price often reflects this tension — share sales typically carry a premium.

Working with Professionals for Your Business Sale

A business sale of any significance warrants a professional team:

Business broker or M&A adviser: Manages the sale process, finds buyers, manages negotiations. Typically charges 5–10% of the sale price.

Accountant (tax specialist): Handles the tax structuring, CGT concession applications, purchase price allocation, and compliance. This is not a job for a general tax return accountant — find one who specialises in small business sales.

Financial planner: Determines how to optimise the post-sale funds — super contribution strategy, retirement income planning.

Solicitor (commercial/business law): Prepares sale contracts, manages due diligence, handles settlement.

The professional fees on a $500,000 business sale might total $30,000–$60,000. The tax saving from correctly applying the small business CGT concessions on the same sale could be $50,000–$150,000. The investment pays for itself.

Comparison: Tax Treatment by Sale Scenario

  • 20 years, age 60, $400k gain — $400,000 — 15-year exemption → $0 — $0
  • 8 years, age 52, $300k gain — $300,000 — 50% AAS + 50% disc + retirement exempt → $0 — $0
  • 5 years, age 45, $200k gain — $200,000 — 50% AAS + 50% disc = $50k gain at 34.5% — ~$17,250
  • 1 year, age 35, $150k gain — $150,000 — 50% AAS = $75k gain at 34.5% (no disc, <12 months) — ~$25,875
  • Sole trader, no planning, $300k gain — $300,000 — 50% disc = $150k at 34.5% — ~$51,750

Frequently Asked Questions

Q: Can I sell my trade business if it's operating at a loss?
Yes. A business with losses may still have goodwill value (clients, reputation, equipment) that a buyer will pay for. The sale proceeds may still be assessable if they exceed the cost base of assets. A business operating at a loss will typically sell for less, but it can still sell.

Q: What if my business is a sole trader — how does that affect the sale?
Sole traders sell assets, not a business entity. You sell goodwill, equipment, work in progress, and any other assets individually. The small business CGT concessions can still apply to the capital gain on goodwill.

Q: How long does a business sale typically take?
For a small trade business, the process from first marketing to settlement typically takes 3–12 months. Due diligence, negotiation, and finance approval for buyers take time. Don't wait until you're ready to stop working tomorrow — plan the exit 12–24 months in advance.

Q: Can I stay on after the sale?
Often buyers prefer this — a transition period where the previous owner introduces clients, trains staff, and provides technical knowledge. This can be structured as an employment or consulting arrangement of 3–12 months. Ensure any post-sale consulting income is properly structured to avoid it being treated as additional sale consideration (which could affect the CGT concession calculations).