“A small business is an amazing way to serve and leave an impact on the world you live in.” (Nicole Snow)
Small business owners looking to sell their business or interest in a business as part of their retirement planning will be glad to know that meaningful tax relief has been provided for them in the 2026 National Budget.
Among other measures to support businesses, National Treasury raised the capital gains tax exemption for the sale of a small business for older persons (55+) from R1.8 million to R2.7 million, a long-overdue adjustment for inflation and rising asset values.
The higher exemption also applies to more businesses than it did before. Where small businesses used to be defined as those valued at R10 million or less, the limit has been increased to R15 million.
Do I qualify?
First check if you meet the bare minimum requirements:
- The exemption applies to individuals aged 55 or older.
- The exemption applies when disposing of a small business with a market value not exceeding R15 million.
- The market value of all assets, regardless of their nature, must be considered in determining whether the R15 million threshold is exceeded or not.
- Liabilities of the business are ignored for this determination.
- For partnerships or companies, the R15 million threshold applies to the total assets of the business, not each partner or shareholder’s fractional interest. This means a two-partner business with R20 million in assets will not qualify, even if each partner’s share is only R10 million.
- The lifetime CGT exemption is capped at R2.7 million in total across all disposals.
- Each asset must have been held continuously for at least 5 years prior to disposal and the individual that qualifies for the relief had been substantially involved in the operations of the business of that small business during this period.
- The relief must be determined on an asset-by-asset basis.
Given the complexity of this determination and SARS’ requirement that relief must be determined on an asset-by-asset basis, professional tax assistance is highly recommended.
How could it benefit you?
Many small business owners rely on the eventual sale of their business as their primary retirement asset.
This tax relief can support succession planning, intergenerational transfers, and smart business exits, particularly for family-owned businesses. It encourages the sale of businesses, effectively unlocking capital and allowing for business continuity or reinvestment into the economy.
Of course, the additional tax-free capital gain will also meaningfully boost your retirement security after years of building a business.
If you’re considering retiring or selling soon, it’s worth reviewing your timing with a tax advisor. We can assist you in reviewing your business valuation, assessing your CGT exposure and structure and timing your exit correctly to make the most of this meaningful tax exemption.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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