A senior executive of a chartered accounting firm has reminded practitioners whose clients are wanting to use the small business capital gains tax (CGT) concession pertaining to the retirement exemption that the relevant amount to be applied is not $500,000.
Under the rules, capital gains can be disregarded up to a lifetime limit of $500,000 and if the business owner is under 55 years of age, the exempt gain must be contributed into a superannuation fund.
“That $500,000 is the maximum amount, but it is limited by the ultimate gain you are looking to disregard. So you can’t just make a $500,000 retirement exemption [contribution] when you are only actually disregarding $200,000 worth of an ultimate gain,” Cooper Partners director and head of SMSF and succession Jemma Sanderson told delegates at the ASF Audits Technical Summit 2026 held in Adelaide recently.
“So that’s where the limitation is. A lot of people think: ‘I’ve got $500,000 I can throw into super under those provisions,’ but that is not how it works.”
Further, Sanderson pointed out the $500,000 retirement exemption limit must operate in conjunction with the lifetime CGT cap. This boundary is indexed and was $1.935 million for the 2027 financial year.
However, to this end, she indicated practitioners and SMSF members must make the distinction as to what each part of the small business CGT concession components covers.
“The $500,000 is looking at the net gain that you’re disregarding, whereas the lifetime CGT cap is looking at the capital proceeds from the sale of the particular asset,” she explained.
“It’s fantastic if people are eligible for [the lifetime CGT cap, but] it’s important though that the $500,000 [relating to the retirement exemption] is included towards the $1.935 [million cap].”
She indicated individuals do not have to retire in order to use the retirement exemption.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
Articles by Darin