The Small Business CGT concessions in Division 152 of ITAA 1997 can apply to capital-purpose Key Person cover where the proceeds are linked to the disposal or revaluation of an active small-business asset (typically equity from a deceased or disabled owner's estate under a buy/sell). Eligibility hinges on the threshold tests in s152-10.
This is a tax-structuring matter, not an insurance product feature. The four concessions in Division 152 are:
- 15-year exemption (s152-110)
- 50% active asset reduction (s152-205)
- Retirement exemption (s152-305)
- Rollover (s152-410)
The panel is AIA, Zurich, TAL, OnePath, ClearView, NEOS, Encompass, Acenda, and Futura. None of the panel PDSs make representations about the Small Business CGT concessions; this is the role of your accountant or registered tax agent.
When the concessions can interact with Key Person cover
The concessions apply when a CGT event happens in connection with an active small-business asset. For Key Person cover, the typical scenario is:
- A business owner dies or becomes disabled
- A buy/sell agreement triggers a forced sale of the equity from the estate to the surviving owners
- The equity is an 'active asset' (used in the business)
- The Key Person insurance proceeds fund the buyout
- The CGT event on the disposal of the equity from the estate can attract the concessions, if the threshold tests are met
The interaction is not the insurance proceeds themselves (those are generally exempt from CGT under ITAA 1997 s118-37(1)(a) where the recipient is the original beneficial owner) but the underlying disposal of the business asset that the proceeds fund.
The threshold tests
To qualify for any of the four concessions, the taxpayer must meet the basic conditions in s152-10:
| Test | Threshold |
|---|---|
| Maximum net asset value test (s152-15) | The net value of CGT assets of the taxpayer and connected entities does not exceed $6 million immediately before the CGT event |
| Small business entity test (s152-10(1A)) | The taxpayer is a small business entity with aggregated turnover under $2 million in the relevant year |
| Active asset test (s152-35, s152-40) | The asset has been an active asset for at least half of the ownership period, with a maximum 7.5-year requirement |
| Significant individual test (s152-50) | For shares in a company or interests in a trust, the taxpayer must hold a CGT concession stake at least 20% |
The taxpayer must satisfy at least one of the maximum net asset value test or the small business entity test, plus the active asset test, plus (for shares or trust interests) the significant individual test.
Each concession in summary
- 15-year exemption (s152-110): full CGT exemption where the asset has been owned for 15+ years and the taxpayer is 55+ and the disposal is in connection with retirement, OR the taxpayer is permanently incapacitated.
- 50% active asset reduction (s152-205): reduces the capital gain by 50% in addition to the general 50% CGT discount in Division 115. Combined, the gain can be reduced by 75%.
- Retirement exemption (s152-305): up to $500,000 lifetime per individual can be exempt; for taxpayers under 55, the exempt amount must be paid to a complying super fund.
- Rollover (s152-410): deferral of the gain when replacement assets are acquired within 2 years.
These concessions are stackable: a single CGT event can attract multiple concessions, often producing a full or near-full exemption.
Structuring choices that affect concession eligibility
The ownership structure of Key Person cover materially affects whether the concessions can be claimed on the underlying business-asset disposal:
- Business-owned cover (the company or trust owns the policy): proceeds flow to the entity. The entity then buys back the equity. The CGT event is the disposal of the equity by the deceased estate; the estate may claim the concessions if it meets the threshold tests.
- Cross-owned cover (each owner owns policies on the others): proceeds flow directly to the surviving owners, who buy the equity from the estate. The CGT event is the same; the concession analysis is on the estate.
- Trust-owned cover (insurance trust or family trust): proceeds flow to the trust, which then funds the buyout. The trust deed and beneficial-ownership tests affect whether the CGT exemption under s118-37(1)(a) is preserved on the insurance proceeds themselves, and the active-asset analysis on the underlying disposal.
The structure also affects whether the maximum net asset value test is met: aggregating the assets of connected entities (companies, trusts, partnerships) can push a business owner over the $6 million threshold even where the standalone business is well under.
Where the panel insurers fit
None of the panel insurers make tax representations about Division 152. The PDS text confirms tax is the policy owner's responsibility. Examples:
- TAL Accelerated Protection PDS (12 December 2024):
Tax may apply if the policy or insurance is taken out for business purposes and you should seek professional taxation advice.
- Acenda Insurance PDS (27 September 2025) onwards: tax considerations on Business Expenses cover, deferring to professional advice.
- AIA, Zurich, OnePath, ClearView, NEOS, Encompass, Futura PDSs: standard tax-section disclaimers in the relevant general-terms section.
The panel insurer's role is to issue the policy and pay the claim; the concession analysis is your accountant's role.
Common considerations
- Review the threshold tests annually, particularly as the business grows. Crossing the $2 million aggregated turnover or $6 million net asset value can disqualify the entire framework.
- For owners aged 55+ with 15+ years of ownership, the 15-year exemption is the most powerful concession; structure the buy/sell trigger to align with this where possible.
- Stack the concessions: 50% active asset reduction plus the general 50% CGT discount plus retirement exemption can reduce the gain to nil in many SME scenarios.
- Use the rollover concession to defer a gain when replacement assets are acquired within 2 years; this is useful where the business is being restructured rather than wound up.
- The concessions interact with super contribution caps (the retirement exemption requires contribution to a complying super fund for taxpayers under 55, and the contribution is subject to the CGT cap election).
- Engage a registered tax agent or accountant familiar with the Small Business CGT concessions before finalising ownership and beneficiary structures for Key Person cover.
- General advice only. The General Advice Warning above continues to apply.
Regulator anchor
- ITAA 1997 Division 152 (Small Business CGT concessions)
- ITAA 1997 s118-37(1)(a) (CGT exemption for life insurance policy proceeds)
- ATO TR 2009/2 (capital vs revenue framework for Key Person)
- ATO QC 22655 (Small business CGT concessions overview)
- ATO Self-Managed Super Funds rulings on insurance for SMSF members and the CGT cap election
- Corporations Act 2001 (Cth) for company law on equity transfers