Small Business CGT Rollover

The small business CGT rollover allows a taxpayer to choose to defer all or part of a capital gain made on an active asset for at least two years. An active asset is an asset used in the small business such as goodwill, commercial premises, licences, and patents.

If the rollover is applied there is no requirement that the taxpayer actually acquires a replacement asset within the two year period, or even has the intention to acquire a replacement asset. As such, this concession can be used by taxpayers selling their business, retiring, or leaving the country.

Applying the rollover allows the taxpayer to defer the capital gain and tax liability for two years. After the two year period expires the capital gain will be included in the taxpayer’s tax return as income (CGT event J5).

If within the two year period the taxpayer buys replacement active assets equal to the capital gain rolled over, then no capital gain will be assessable at that time (until the acquired active assets are subsequently sold). If the acquired replacement assets are less than the value of the rollover applied, then the difference will be a taxable capital gain (CGT event).