CGT Small Business Concessions: Using an Asset in Your Business for the Required Time

A recent decision by the tax tribunal has reinforced a key rule for accessing the Capital Gains Tax (CGT) small business concessions: if you sell a business asset and want to claim the CGT concessions, the asset must have been used in your business—or at least held ready for use—for a specific period of time.

What is the "Required Time"?

To qualify for the CGT small business concessions:

• The asset must have been used or held ready for use in your business for at least half the period you owned it, or
• If you owned the asset for 15 years or more, then it must have been used (or held ready for use) for at least 7½ years.

The phrase “held ready for use” is important here. It doesn’t mean the asset had to be in active use the whole time. It could have been in preparation—for example, during setup, construction, or waiting for operations to begin.

Example: When It Doesn’t Qualify

In a recent tribunal case, a taxpayer inherited farming land but never used it for their own farming business. Instead, it was left vacant and later used by relatives. The taxpayer argued it was “held ready for use” in their own business, but the tribunal found no real evidence of intent or preparation. As a result, the entire capital gain was fully taxable—the CGT concessions didn’t apply.

When an Asset May Be Held Ready for Use

There are many situations where the “held ready for use” rule can help meet the required period:

• Farmland: While waiting for livestock to arrive, building fences, or sowing crops.
• Other Businesses: During the fit-out of a shop or factory, or when building infrastructure like greenhouses for a nursery.

These preparatory periods can count towards the required time, even if actual trading hasn’t yet started.

Important Considerations

Determining whether an asset is truly held ready for use in a business can be complex. This is especially true if the asset has been used for mixed purposes, such as rental income alongside business use.

If you're planning to sell a business asset and want to make sure you qualify for the CGT small business concessions, it’s vital to assess how the asset has been used over time.

Need Help?

If you're a small business owner and you're unsure whether your asset qualifies for CGT concessions, get in touch with us. We can review your situation and help you understand your eligibility—and potentially save you a significant amount in tax.