Company Capital Gains Tax

Understanding Company Capital Gains Tax: What Every Business Owner Should Know

When businesses sell assets like real estate, investments, or shares at a profit, they often face a hidden cost: Company Capital Gains Tax (CGT). Understanding how this tax works is essential for entrepreneurs, company directors, and financial professionals aiming to optimize their tax efficiency and avoid compliance pitfalls. In this article, we break down what Company Capital Gains Tax is, when it’s applicable, and how companies can manage it strategically.

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What Is Company Capital Gains Tax (CGT)?

Capital Gains Tax for companies forms part of taxable income—it’s not a standalone tax. When a business disposes of an asset and makes a capital gain (sale proceeds exceed the cost base), that gain is included in total assessable income and taxed at the corporate rate (Australian Taxation Office).

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Key CGT Tax Rates for Companies

Unlike individuals, companies cannot claim the 50% CGT discount, even when holding assets over 12 months (The Australian).

• Base rate entity (aggregated turnover < $50 million and ≤ 80% passive income): taxed at 25%

• Other companies: pay the standard corporate rate of 30%

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When Does CGT Apply to Companies?

CGT events for companies commonly include:

• Sale of business property, shares, or other investments

• Transfer or cancellation of company shares

• Disposals such as destruction, gifting, or redemption of assets (Australian Taxation Office, Australian Taxation Office, Australian Taxation Office, Australian Taxation Office)

Certain restructurings or mergers may qualify for CGT rollovers, enabling deferral of capital gains tax.

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Calculating Capital Gains for Companies

1. Cost base = purchase price + transaction costs (e.g. legal, brokerage fees, improvements)

2. Capital gain = sale proceeds minus cost base

3. Companies cannot use discount, but indexation may apply for assets acquired before 21 September 1999 (Australian Taxation Office, Australian Taxation Office)

Note: Depreciating assets used exclusively for business purposes may be exempt from CGT; otherwise, disposal is treated using capital allowance rules (Australian Taxation Office).

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Small Business CGT Concessions for Companies

Eligible companies may reduce or eliminate CGT using these concessions:

• 15‑year exemption

• 50% active asset reduction

• Retirement exemption

• Small business rollover

To qualify, the company must:

• Be a CGT small business entity with aggregated turnover under $2 million  or

• Meet the $6 million net asset value test (Australian Taxation Office, Australian Taxation Office, Australian Taxation Office)
  These concessions apply only to active assets used in the ordinary course of business (Australian Taxation Office, Australian Taxation Office).

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Reporting and Compliance

Companies must report any CGT events in their annual company tax return (e.g. item 7 in the 2025 return) and complete the CGT Summary Worksheet if required (Australian Taxation Office).

Workpapers, including the capital gains/loss worksheets and summary worksheet, should be maintained but are not lodged with the return (Australian Taxation Office).

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FAQs

1. What rate applies to company CGT in Australia?

Capital gains realized by companies are taxed at corporate rates—25% for base rate entities, 30% for others.

2. Can companies claim the 50% CGT discount?

No. Companies are not eligible for the individual discount, regardless of holding period.

3. What small business CGT concessions are available?

Companies may qualify for exemptions or deferrals via the 15‑year exemption, active asset reduction, retirement or rollover assistance—subject to eligibility criteria.

4. How is CGT calculated for company assets?

Calculate: sale proceeds minus cost base (purchase price + associated costs). Indexation may apply for pre‑1999 acquisitions. The resulting gain is taxed at corporate rates.

5. Do companies need to maintain records?

Yes. Records of purchase, sale, costs, and worksheets should be kept to accurately report CGT in the company’s tax return for the relevant financial year.

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Useful Resource

For official details on CGT, guidelines, eligibility, and calculations, refer to the Australian Taxation Office guide: Guide to capital gains tax (business.gov.au, Australian Taxation Office)