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Small business CGT / Reference

Does your asset pass the active asset test?

The active asset test is one of two gateways to the small business CGT concessions, and the one that most often decides a property sale. In short: the asset has to have been used in your business, rather than held as a passive investment, for enough of the time you owned it.

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The short answer

An asset passes the active asset test if it was used, or held ready for use, in carrying on a business, by you or a connected entity, for at least half the ownership period where held 15 years or less, or at least 7.5 years where held longer.

Applies to

SBCGT concessions

Test type

Use, not asset type

Common sticking point

Rental property

What counts as an active asset

The active asset test looks at how an asset was used, not what kind of asset it is. The same building can pass in one owner's hands and fail in another's, depending entirely on use.

Usually active

Premises you trade from, plant and equipment used in the business, goodwill, and shares or trust interests that meet the 80 per cent test.

Usually not active

A property leased to a third party for rent, shares held as a passive investment, and cash or financial instruments held to derive interest.

The reason a rental property usually fails is that deriving rent is generally not carrying on a business. Where a property was used in your own business and later rented out, the test weighs the whole ownership period, not its status on the day of sale.

How the active asset test is applied

Two questions settle it. First, was the asset used in a business, by you or by a connected entity or affiliate. Second, was it active for long enough. An asset held for 15 years or less needs to have been active for at least half that time. An asset held for longer needs at least 7.5 years of active use. The periods do not have to be continuous, so an asset that moved in and out of business use can still pass if the active periods add up.

Amber, held before publish. Confirm with Dominic against the current provision: the exact holding-period fractions stated above, the 80 per cent test wording for shares and trust interests, and the treatment of assets held through connected entities. These mechanics are not in the source pack supplied. The page does not go live until they are green.

When this page changes

The active asset test itself is long-standing and does not move with the annual rates. What sits around it does: the turnover thresholds that gate the concessions were amended by the 2026 reform, with the fifty per cent active asset reduction rising to a $10 million turnover test from 1 July 2027. This page is reviewed whenever that surrounding law shifts.

Where this sits

This is one of the reference pages beneath the small business CGT concessions guide. Read the guide for the full picture, and use this page when the specific question is whether a particular asset qualifies as active.

Frequently asked questions

What makes an asset an active asset?
An asset is active if it was used, or held ready for use, in carrying on a business, by you or by a connected entity or affiliate. Trading premises, plant and equipment, and business goodwill are typically active. Shares and trust interests can qualify where they meet the 80 per cent active asset test.
How long does an asset have to be active for the test?
For an asset owned for 15 years or less, it must have been active for at least half the ownership period. For an asset owned longer than 15 years, it must have been active for at least 7.5 years. The active periods do not need to be continuous, so time in and out of business use can be added together.
Does a rental property pass the active asset test?
Usually not. Deriving rent from a property leased to a third party is generally not carrying on a business, so the property is treated as a passive investment. A property used in your own business is different, and one that was business premises before being rented out is weighed across the whole period you owned it.
Do shares in a company count as an active asset?
They can. Shares in a company, or an interest in a trust, can be an active asset where the entity itself meets the 80 per cent test, broadly that at least 80 per cent of its assets are active assets or cash and financial instruments connected with the business. This is worth confirming for your specific structure before you rely on it.
Why does the active asset test matter for the CGT concessions?
Because it is one of two gateways every small business CGT concession sits behind. If the asset you are selling fails the active asset test, none of the four concessions is available, however comfortably you pass the turnover or net asset size test. It is often the single condition that decides whether a sale is taxed in full.

Not sure your asset qualifies? Ask before you sell.

Whether an asset passes the active asset test turns on how it was used across the years you held it, and it is far cheaper to check before contracts than to argue afterwards. Speak to a director about your situation.

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No online form needed. Call, or email hello@murchisons.com and a director will reply, usually the same day.