Most tradies start, run and (eventually) exit a business — but the exit is the part nobody plans, and it is where the biggest tax decisions live. Whether you sell, hand it to family, or wind it down, the small business CGT concessions can wipe out the tax on the sale — but only if you have set it up years ahead. This is general guidance — the small business CGT concessions are technical and high-stakes, so an accountant is non-negotiable.
The exit routes
- Asset sale (most common for tradies): the buyer purchases the goodwill, client list, phone number, domain, plant, vehicles, lease, brand and staff contracts; you keep the legal entity and deal with the tax and any remaining liabilities. Simpler for the buyer (no legacy debts), more CGT "events" on your side.
- Share sale (only if incorporated): the buyer buys the shares (one CGT event, small-business concessions may apply) — attractive to you but riskier for the buyer, so rarer and often discounted.
- Succession to family or a key employee (via vendor finance, an earn-out or gradual equity transfer).
- Merger or bolt-on into a bigger operator.
- Orderly wind-down — stop new work, finish jobs, sell the gear, deregister — the default if the business is too owner-dependent or poorly documented to sell.
What makes a trade business saleable is transferable cash flow, not a busy owner: systems and documentation (job management, SOPs, asset registers), clean 3+ year financials with business and personal separated, recurring or contract work (maintenance, builder/strata repeat), a business not fully owner-dependent (other licensed tradies, a foreman, brand-loyal customers), and key staff locked in so the team runs 6-12 months without you. "It is all in my head and I am the only licensed tradie" means a buyer is buying a job, not a business.
CGT on the sale — and the four concessions
The basics: goodwill, the client list and brand are CGT assets (proceeds minus cost base); plant, tools and vehicles in a depreciation pool attract no CGT but a balancing adjustment (proceeds vs adjustable value, becoming assessable income or a deduction); property is a separate CGT asset.
To use any of the four small business CGT concessions, you must pass the basic conditions: be a CGT small business entity (aggregated turnover under $2 million) or meet the maximum net asset value test ($6 million), and the asset must be an active asset (used in the business for at least half the ownership period, or 7.5 of the last 15 years). The concessions:
- 15-year exemption — own the active asset for 15+ years, be 55+ and selling in connection with retirement (or permanently incapacitated), and the entire gain is disregarded (no other concession needed).
- 50% active asset reduction — reduce the remaining gain by a further 50% (after capital losses and the general CGT discount).
- Retirement exemption — disregard gains up to a $500,000 lifetime limit per individual; under 55 it must be paid into super, 55+ you can take it tax-free.
- Roll-over — defer the gain if you buy a replacement active asset within the timeframe (a timing tool, not permanent).
The order: check eligibility → if the 15-year exemption applies, use it → otherwise apply capital losses → the general 50% CGT discount → the 50% active asset reduction → then the retirement exemption and/or roll-over. The key message: exit planning must happen years ahead to satisfy the active-asset periods, the turnover and net-asset thresholds, and (for the 15-year exemption) the 15-year ownership window.
Tax and super on exit — the CGT cap
A special CGT cap lets eligible proceeds (from the 15-year or retirement exemption) go into super without counting against your normal non-concessional cap, up to a lifetime limit (indexed — check the current figure) — but you must lodge a CGT cap election form with the fund when you contribute. Time the sale so it lines up with when you satisfy the tests, meet the age conditions and have headroom under the cap.
The wind-down checklist
If you are closing rather than selling:
- Cancel GST within 21 days of ceasing, and cancel the ABN once finished.
- Final BAS (including GST on the sale of assets and stock), final income tax return (capital gains and balancing adjustments), and final PAYG/STP if you had employees.
- Keep records for 5 years.
- Cancel or adjust the state trade licence (you cannot "sell" a personal licence — just the business), workers' comp, PL and motor insurances, and leases (or assign them in a sale).
- Notify clients, suppliers, builders, strata and the regulators.
The ATO warns against phoenixing or walking away from liabilities (see ATO Audits & Disputes).
Succession specifics
You cannot transfer a personal licence — a family member or key employee gets their own licence and buys the business around it. Start early (3-10 years for family), train the successor and shift client relationships, document the deal (valuation, up-front plus earn-out or vendor finance), and handle equity vs fairness for non-business family in the will. Transferring assets to family is still a CGT or balancing-adjustment event — document market value and consider the concessions. Earn-outs can themselves be CGT assets (the ATO "look-through" rules), and staying involved can keep you "in business" for the eligibility tests — accountant territory.
Common mistakes
- No records = no goodwill value — buyers discount heavily or walk.
- Leaving it too late — a health event forces a wind-down and the value evaporates.
- The business equals the owner — no team or brand to transfer.
- Ignoring the tax structure years ahead — staying a sole trader when a company or trust would allow better concessions and super on exit; or sale terms that accidentally blow eligibility.
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