Someone with $2.3 million already in superannuation cannot make a non-concessional contribution at all. Their cap is nil.
The same person, selling a business they have owned for eighteen years, may be able to contribute $1,935,000 into superannuation in a single year.
That is not a loophole. It is the lifetime CGT cap, a deliberate policy setting recognising that for many Australians the business was the retirement plan, and that the ordinary contribution caps would make it impossible to get the proceeds into a concessionally taxed environment.
It is also one of the most complex areas of Australian tax law, with strict eligibility conditions, an election form that must be lodged before the contribution, and deadlines that are missed regularly. This guide explains what the concessions do, how they feed into the super cap, and where the money is won and lost.
The caps that do not apply
Contributions made under the CGT cap sit outside the non-concessional contributions cap entirely. That produces three consequences worth stating plainly:
- They can be made in addition to ordinary non-concessional contributions, including a bring-forward arrangement.
- They can be made even where your non-concessional cap is nil because your total super balance is at or above the general transfer balance cap.
- They are a lifetime allowance of $1,935,000 for 2026-27, indexed to average weekly ordinary time earnings in $5,000 increments, and once used it is gone.
The second point is the one that changes outcomes. A business owner with a substantial existing balance who assumes they are locked out of super entirely is often wrong, and the difference is measured in hundreds of thousands of dollars. Our guide on total super balance explains the threshold that locks people out of ordinary contributions.
The four concessions
| Concession | What it does | Feeds the CGT cap? |
|---|---|---|
| 15-year exemption | Disregards the entire capital gain | Yes, up to the full lifetime cap |
| 50% active asset reduction | Halves the remaining gain | No |
| Retirement exemption | Disregards up to $500,000 of gain, lifetime | Yes, up to $500,000 |
| Rollover | Defers the gain for up to two years | No |
Only two of the four generate an amount that can be contributed under the CGT cap. That distinction drives most of the planning.
The basic conditions come first
None of this is available unless the basic conditions in the small business CGT provisions are satisfied. In broad terms that means a CGT event happening to an asset that would otherwise produce a gain, the asset satisfying the active asset test, and the taxpayer satisfying one of the entry tests, most commonly being a small business entity with aggregated turnover under $2 million, or satisfying the $6 million maximum net asset value test.
Where the asset is shares in a company or units in a trust, additional conditions apply, including requirements about CGT concession stakeholders and the underlying activity of the entity.
These conditions are genuinely difficult, they turn on facts that are often established years earlier, and eligibility is where most disputes arise. This is specialist tax work and needs a tax adviser rather than a general accountant, well before the sale rather than after it.
The 15-year exemption
This is the most generous concession in the Australian tax system and it produces the largest super contribution.
Broadly, it applies where the asset has been continuously owned for at least 15 years and, for an individual, the person is aged 55 or over at the time of the CGT event and the event happens in connection with their retirement, or they are permanently incapacitated. Where a company or trust holds the asset, the tests apply through the significant individual rules.
Where it applies, the entire capital gain is disregarded. No tax at all.
The superannuation consequence is the important part: it is the capital proceeds, not merely the gain, that can be contributed under the CGT cap, up to the lifetime limit. For an asset with a low cost base, that is a materially larger number than the gain alone.
A worked example
An owner aged 62 sells business premises and goodwill held for 18 years, retiring on settlement. Capital proceeds are $2.1 million and the capital gain is $1.4 million.
Under the 15-year exemption the entire $1.4 million gain is disregarded. She can then contribute up to the lifetime CGT cap of $1,935,000 from the proceeds, using the CGT cap election so that none of it counts against her non-concessional cap.
If her total super balance also allows it, she could make a separate non-concessional contribution under the bring-forward rule in the same year, on top. Figures are illustrative and eligibility would need to be confirmed.
The retirement exemption
Where the 15-year exemption is not available, usually because the asset has not been held for 15 years or the retirement and age conditions are not met, the retirement exemption is the next avenue into super.
It disregards up to $500,000 of capital gain per individual, as a lifetime limit that is not indexed. If you are under 55, the disregarded amount must be contributed to superannuation. At 55 or over, contributing is optional.
The $500,000 is a sub-limit within the overall CGT cap. Someone who only ever uses the retirement exemption has an effective CGT cap of $500,000, not $1,935,000.
The counterintuitive part: skipping a concession on purpose
Here is the planning point that most business owners have never had explained to them.
The concessions are applied in a set order, and the 50% active asset reduction is optional. Choosing not to apply it can put substantially more money into superannuation for the same tax outcome.
Take a gain of $400,000 remaining after the general CGT discount, where the 15-year exemption is unavailable.
| Apply the 50% reduction | Skip the 50% reduction | |
|---|---|---|
| Gain after active asset reduction | $200,000 | $400,000 |
| Retirement exemption applied | $200,000 | $400,000 |
| Taxable gain | Nil | Nil |
| Amount contributable under the CGT cap | $200,000 | $400,000 |
Same tax result, twice as much into super. The trade-off is that it consumes $400,000 of the $500,000 lifetime retirement exemption rather than $200,000, so it is not free. But for someone who will not have another qualifying sale, it is usually the better outcome.
This is precisely the sort of decision that is unavailable once the return has been lodged, which is why the advice needs to happen before the sale settles rather than after.
One forward-looking note. The general 50 per cent CGT discount is being replaced for individuals and trusts from 1 July 2027, as our guide on the CGT discount changes explains. How that interacts with the ordering of the small business concessions is a question your tax adviser should be asked directly, as guidance in this area is still developing.
Timing and the election form
This is where otherwise valid claims fail.
- The election form must come first. ATO form NAT 71161, Capital gains tax cap election, must be given to your super fund on or before the time the contribution is made. Not afterwards. A contribution made without the election in hand counts against your non-concessional cap.
- The 15-year exemption has a contribution deadline. Broadly, the contribution must be made by the later of the day you lodge your income tax return for the year the CGT event happened and 30 days after you receive the proceeds. Where a company or trust distributes proceeds to an individual, that 30 day clock runs from receipt, which is often much earlier than the return.
- The retirement exemption has its own timing, broadly the later of when you make the choice and when you receive the proceeds.
- Age still applies. The fund can generally only accept the contribution if you are under 75, with acceptance permitted up to 28 days after the end of the month in which you turn 75.
- Earnout arrangements and instalments have specific rules requiring contributions on receipt of each instalment. If your sale has a deferred component, raise this early.
The most common failure is simple. The proceeds arrive, the business owner attends to a hundred other things, and by the time the accountant is preparing the return the following year the window has closed. The money is then subject to the ordinary caps, and for someone with a large balance that can mean it cannot go into super at all.
What it does to everything else
A contribution of this size changes your whole superannuation position, and the consequences need to be modelled before rather than discovered after.
- Total super balance. CGT cap contributions increase it, which affects your capacity to make ordinary non-concessional contributions in later years.
- Transfer balance cap. The general cap is $2.1 million for 2026-27, and it limits how much can be moved into a retirement phase pension. A contribution of $1.9 million will not all fit into pension phase, and the excess stays in accumulation taxed at 15 per cent. Our guide on the transfer balance cap covers that.
- Division 296. Balances above $3 million attract additional tax. A large CGT cap contribution can push someone across that threshold, which our guide on Division 296 explains.
- Division 293. The year of a business sale is often a high income year, and Division 293 tax can apply to concessional contributions made in it. Our guide on Division 293 sets out the threshold.
- Estate planning. CGT cap contributions form part of the tax-free component, which reduces the tax payable by adult children on a death benefit. That is a genuine long-term advantage and it works alongside the recontribution strategy.
The traps
- Assuming eligibility. The basic conditions, the active asset test and the significant individual rules are where claims fail. Confirm eligibility before structuring the sale.
- Missing the election. The form must be with the fund on or before the contribution.
- Missing the deadline, particularly the 30 day window from receipt of proceeds.
- Exceeding the cap. Amounts above the lifetime CGT cap, or above $500,000 for the retirement exemption, are counted against your non-concessional cap instead, with the penalties that follow.
- Not tracking prior use. The cap is a lifetime figure covering all elections since 1 July 2007. Contact the ATO to confirm what has already been reported rather than relying on memory.
- Applying the 50% reduction without considering the alternative, as above.
- Contributing everything because you can. Superannuation is preserved, the rules change, and a large balance attracts additional tax. Our guide on investing inside or outside super is the counterweight.
Where Professional Advice Adds Value
This is unavoidably a two-specialist job, and the division is clear. Eligibility for the concessions themselves is tax work requiring a specialist tax adviser, ideally one who deals with small business CGT regularly, engaged before the sale is structured. The conditions turn on facts established over years, and some of them can still be influenced if the advice is early enough.
Our part at Money Path is everything downstream of eligibility. That means working out how much should actually go into superannuation as opposed to how much could, which is a different question. It means modelling what the contribution does to your transfer balance cap, your Division 296 position and your capacity for future contributions. It means sequencing the CGT cap contribution alongside a bring-forward arrangement, carry-forward concessional contributions and, for SMSF members with an exceptional income year, a contribution reserving strategy. Used together across two financial years, those tools can move a very large amount into a low tax environment.
And it means making sure the deadlines are diarised and the election form is executed before the money moves, because that is where good tax advice most often comes undone. Our guides on planning around a business exit and moving from accumulation to retirement income cover the stages either side.
Frequently asked questions
How much can I contribute to super from selling my business?
Up to the lifetime CGT cap, which is $1,935,000 for 2026-27 and is indexed. Only amounts arising from the small business 15-year exemption and the retirement exemption count towards it, and the retirement exemption has its own lifetime sub-limit of $500,000.
Do CGT cap contributions count towards my non-concessional cap?
No, provided you make a valid CGT cap election. They sit outside the non-concessional cap, which means they can be made in addition to ordinary non-concessional contributions and can be made even if your non-concessional cap is nil because of your total super balance.
What is the difference between the 15-year exemption and the retirement exemption?
The 15-year exemption disregards the entire capital gain and allows the capital proceeds to be contributed up to the full lifetime CGT cap. The retirement exemption disregards up to $500,000 of gain as a lifetime limit and only that amount can be contributed. The 15-year exemption is considerably more generous where you qualify.
When do I have to make the contribution?
For the 15-year exemption, broadly by the later of the day you lodge your return for the year the CGT event happened and 30 days after receiving the proceeds. For the retirement exemption, broadly the later of when you make the choice and when you receive the proceeds. Instalment and earnout arrangements have their own rules. The deadlines are strict and missing them is common.
Do I need to lodge a form?
Yes. The Capital gains tax cap election, ATO form NAT 71161, must be given to your super fund on or before the time you make the contribution. If it is not, the contribution counts against your non-concessional cap instead.
Should I skip the 50% active asset reduction?
Sometimes. The active asset reduction does not create an amount that can be contributed under the CGT cap, so choosing not to apply it can leave a larger gain to be disregarded under the retirement exemption and contributed to super, with the same nil tax outcome. The cost is that it uses more of your $500,000 lifetime retirement exemption. This should be modelled before the sale.
Can I use the CGT cap if my super balance is already over $2 million?
Generally yes. The CGT cap operates separately from the non-concessional cap, so a nil non-concessional cap does not prevent a CGT cap contribution. You do still need to be under 75, and you should model what the contribution does to your transfer balance cap and Division 296 position first.
Taking the next step
If a business sale is anywhere on your horizon, the useful action is to have eligibility for the concessions assessed now rather than at settlement. Some of the conditions can still be influenced years in advance, none of them can be fixed afterwards, and the contribution deadlines start running from the day the money arrives.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not tax advice. The small business CGT concessions are among the most complex provisions in Australian tax law, eligibility depends on conditions summarised here only in outline, and the order in which concessions are applied can materially change your position. The lifetime CGT cap is indexed and the figure stated applies to the 2026-27 financial year. Superannuation is preserved and generally cannot be accessed until you meet a condition of release. Obtain specialist advice from a registered tax agent on eligibility and from a licensed financial adviser on the superannuation consequences before acting.
