Selling your business premises: what CGT takes out of the exit, and when

If you sell premises your business has used for years, the price on the contract isn’t what you walk away with. Selling costs come off, any loan comes off, and capital gains tax may come off too, only months later and after you’ve already spent the money in your head.

That last deduction is the one owners forget to put on the drawings. This guide covers how CGT works on business premises, which small business concessions can shrink it, when the bill actually arrives, and what changes from 1 July 2027. We also show how to build a sale exit with the tax in it, so the far side of the bridge is where you think it is.

How is CGT worked out when you sell business premises?

The basic calculation is simple:

• Capital proceeds: the sale price.
• Less the cost base: what you paid, plus purchase costs such as stamp duty and legal fees, plus capital improvements and selling costs like agent’s commission.
• Equals the capital gain (or loss).

What happens next depends on who owns the property:

• Individuals and trusts that have held the asset for at least 12 months currently get the general 50% CGT discount.
• Companies don’t get the general discount. That’s why a company that owns its premises often has the most to gain from the small business concessions.

Then the small business concessions may apply on top, which is where the real difference is made.

Which small business CGT concessions can apply to premises?

There are four small business CGT concessions, and every one of them sits on the same two piers. Think of these as the foundations to check first:

1. Size. Either the group’s aggregated turnover is below $2m, or the net value of the relevant assets is no more than $6m. For that second measure, things like the family home are generally excluded.
2. Use. The workshop, shop or office needs to have been a working part of the business for at least half of your years of ownership. Owned it longer than 15 years? Then 7.5 years of business use is the minimum.

Clear both and the concessions on offer are:

Concession	What it does	Key conditions
15-year exemption	Wipes out the gain entirely	15 years of ownership, plus being 55+ and retiring (or permanently incapacitated)
50% active asset reduction	Cuts what’s left of the gain in half	Nothing beyond the two foundations above
Retirement exemption	Shelters gains up to $500,000 across your lifetime	Under 55? The sheltered amount goes into super
Small business rollover	Pushes the gain into the future	A replacement asset (or capital works on one you hold), from 12 months before the sale to 24 months after

Two practical points. First, they layer: a personally held workshop might take the general discount, then the active asset halving, then use the retirement exemption on the remainder, sometimes leaving nothing taxable. Second, the order is fixed by law, and a choice you make this year (the rollover especially) can resurface in a later one. This is accountant territory, and it’s worth paying for the advice before you sign, not after.

Do my premises count as an active asset?

In most owner-occupier cases, yes. It also works when the title and the trading sit in different hands, say a family trust holds the building and your company runs the business inside it, because use by a connected entity or affiliate is counted.

Where owners come unstuck:

• Premises mainly rented to someone else. Collecting rent from an outside tenant usually fails the test, even when that tenant is itself a business.
• A building that changed use. If the business moved out years ago and you’ve been leasing it, the “half the ownership period” test may no longer be met.
• Mixed use. Part of a building occupied, part leased out. Get advice on how that’s treated.

When does the CGT event happen, and when is the tax paid?

This is the timing detail with the biggest effect on cash. According to the ATO, if there’s a contract of sale, the CGT event happens when you enter into the contract, not at settlement. A contract signed in June and settled in October puts the gain in the earlier income year.

So the sequence looks like this:

1. Exchange: the CGT event happens and the income year is fixed.
2. Settlement: the money arrives, and the gain can now be reported.
3. Tax return: the gain goes into that year’s return.
4. Assessment: the tax becomes payable, often many months after settlement.

That gap is a trap. The sale proceeds land in full, the old loan is cleared, and the rest feels free. A year later, the tax bill turns up against money that’s already gone into the new premises. Plan for the slow, honest case: hold a reserve until your accountant has confirmed the tax.

GST and the foreign resident clearance certificate are separate issues on a premises sale. The ATO’s page on selling commercial premises covers GST, and our guide to clearance certificates and other settlement blockers covers the paperwork that can hold up settlement day.

What changes from 1 July 2027?

The 2026–27 Budget announced big changes to capital gains tax. Based on Treasury’s small business explainer and the government’s June 2026 announcement:

• For individuals and trusts, the flat 50% CGT discount is replaced from 1 July 2027 with indexation of the cost base for inflation and a 30% minimum tax on real gains.
• Gains that built up before 1 July 2027 keep the old 50% discount, whenever you sell.
• The four small business concessions stay. The government says eligible businesses get the 50% active asset reduction “on top of the discount for inflation”.
• The 50% active asset reduction opens up. Its turnover threshold rises from $2m to $10m from 1 July 2027. The other three concessions keep the existing tests.

What this means for a premises sale:

• Don’t rush a sale just to beat the date. Gains built up before 1 July 2027 keep the old treatment anyway, so a forced sale on bad terms can cost more than it saves.
• Businesses with turnover between $2m and $10m may find a sale after 1 July 2027 qualifies for the active asset reduction when it doesn’t today. Model both cases with your accountant.
• The contract date matters. Because the CGT event is the contract date, signing on 28 June versus 3 July puts the gain under different rules.
• Ask about the value at 1 July 2027. If you’ll still own the premises then, ask your accountant how the value at that date will be worked out for your gain.

If you’re weighing up whether to sell first or buy first, the tax timing is now part of that choice.

If you’re buying new premises and your sale won’t settle in time, tell us about both properties and we’ll map the gap with you.

A worked example: building the tax into the exit

Illustrative figures only. The tax amounts are made-up accountant estimates, not calculations.

Two directors of a joinery business own their workshop personally. They bought it in 2012 and their company has traded from it ever since. They’ve found a larger site and want to buy it before the old workshop settles.

• New site: $1.9m plus $110k of purchase costs.
• Existing loan on the old workshop: $200k.
• Cash contribution: $100k.
• Old workshop sale: $1.45m, less $40k of selling costs.

Peak debt while they own both: $200k + $1.9m + $110k − $100k = $2.11m. Net sale proceeds: $1.45m − $40k = $1.41m.

Now three versions of the exit, depending on what their accountant expects:

	A: general discount only	B: plus active asset reduction	C: rollover or retirement exemption
Peak debt	$2.11m	$2.11m	$2.11m
Net sale proceeds	$1.41m	$1.41m	$1.41m
Tax reserve held back	$140k	$70k	$0 now
Proceeds applied to the debt	$1.27m	$1.34m	$1.41m
End debt on the new site	$840k	$770k	$700k

The gap between A and C is $140k of end debt. That’s the difference between a long-term loan the business can service comfortably and one that’s tight. The directors have owned the workshop for 14 years, so the 15-year exemption isn’t available yet. That’s another reason to get advice early instead of assuming the best case.

A lender sizing this bridge will want the end debt in column A to work, unless the accountant’s advice supports B or C. Put your own figures into the bridging calculator, and read peak debt and end debt for how to read the results.

What should be in your evidence pack before you sign?

A sale is a strong exit when the paperwork shows the whole path. For a premises sale, bring:

• The contract (or the agent’s appraisal and campaign status if you haven’t exchanged yet).
• Your cost base records: the purchase contract, stamp duty, legal fees and receipts for capital improvements.
• A short letter or email from your accountant setting out the expected CGT position and which concessions they expect to apply.
• Discharge figures for any loan on the old property.
• Settlement dates for both properties, with a realistic buffer.

That’s the same logic lenders apply to any sale exit: what repays the bridge, when, how sure, and what’s left over. If you’re buying first, our page on buying before you sell explains how the two properties are usually secured.

The sale is the exit. Let’s make sure it holds up.

You’ve built up value in those premises over years, and the tax rules can let you keep much more of it than many owners expect. What matters now is timing: getting into the new site without waiting on the old one, with the tax reserve and end debt worked out on paper first.

That’s the kind of gap we work on every day. The enquiry takes about 60 seconds, and there’s no credit check when you first enquire. Your details won’t be sent off to a pile of lenders, so your phone won’t light up with strangers. A real person reads your situation and calls you to talk through the span, the security and the exit.

Please fill the form in accurately: both property values, the loan on the old premises, your expected settlement dates and, if you have it, your accountant’s view of the tax. Accurate details let us match the right option first time.

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