Small business policy has to incorporate retirement policy. It’s a joint system, not two separate ones.
In Australia, a small business is ordinarily defined as one employing fewer than twenty people. According to the Australian Small Business and Family Enterprise Ombudsman, around 42% of the private sector workforce is employed by companies with fewer than 20 employees. That might be a local café, a small manufacturing workshop, or a family-owned accounting firm. By contrast, in the United States, the official threshold varies by industry, but in some sectors, a company can have a hundred employees and still qualify as small.
Despite its modest population, Australia has more than 2.5 million small businesses. The country’s entrepreneurial spirit runs deep. From nineteenth-century free settlers and gold-rush labourers to post-World War II migrants, Australians have a history of turning self-reliance into enterprise. Geographically, with a small population spread over a large area, local self-sufficiency led to small business clusters in regional towns. Culturally, Australians value work-life balance and autonomy. The business-owning habit remains part of the national fabric.
It’s no surprise, then, that Australian law takes small businesses seriously, not only as an engine of economic growth, but also as a pillar of secure retirement. The superannuation system recognises that business owners build wealth differently. They often prefer to invest in their own enterprises rather than listed shares or managed funds. To accommodate that reality, Australia has designed a framework that lets entrepreneurs use superannuation strategically at two key points in life: while building their business and when exiting it.
Owning the Premises: Business Real Property Rule
For many business owners, the dream is to own the premises they operate from. It offers stability, control over rent, and a sense of permanence. Yet historically, superannuation law forbade related-party transactions, a safeguard against investment bias and people moving personal assets into their retirement funds to unlock cash or obtain unfair tax benefits.
That changed in 1999, when the “business real property” (BRP) exception was formally defined in the Superannuation Industry (Supervision) Act 1993 (SIS Act s. 66(5)). The legislative intent, outlined in the Senate Committee’s report on the SIS Bill, was to prevent abuse while still recognising legitimate commercial arrangements. Lawmakers reasoned that if a property was wholly used for business purposes and the transaction occurred on arm’s-length terms, it posed little risk of conflicted investment decisions, personal use of retirement savings, or tax manipulation.
In policy terms, the exception struck a balance between growth and protection:
- In Australia, a Self-Managed Super Fund (SMSF) is a private retirement fund that allows individuals to manage their own investments under strict regulatory oversight. Within this structure, the commercial property exception enabled small enterprises to align business and retirement strategies.
- Business owners could transfer or purchase their trading premises through their SMSF, provided it was genuinely used in business.
- The fund could lease it back to the operating company, but only on market-value rent with formal lease agreements.
- Independent auditors ensure the compliance of SMSF commercial property, verifying that the investment meets regulatory requirements.
Access Super Audit provides detailed guidance on SMSF commercial property compliance, including how related-party purchases and leases are assessed during an audit.
For many small enterprises, from medical practices to warehouses, this arrangement became a cornerstone business strategy. It allowed owners to hold their most valuable asset, their premises, in a tax-advantaged and protected structure, while providing stability and certainty over occupancy costs.
The intent was never to turn superannuation into a tax shelter, but to allow productive assets that underpin genuine business activity to coexist with retirement savings. At its heart, it’s a policy that respects entrepreneurship.
Exiting the Business: Small Business CGT Concessions
If the business real property BRP rule helps entrepreneurs build their future, the Small Business CGT Concessions support them as they transition out of business and into retirement. Introduced through Division 152 of the Income Tax Assessment Act 1997, these concessions recognise that many small business owners have most of their wealth tied up in their enterprise rather than in superannuation.
When owners eventually sell, retire, or restructure, the capital gain on that business could otherwise trigger a large tax bill, potentially eroding their lifetime savings. The concessions provide relief through several mechanisms that either disregard, reduce or postpone the gain, depending on the individual’s circumstances.
One key mechanism is that if an owner has held the business for at least 15 years and is over 55 and retiring, the entire capital gain can be disregarded. To qualify, a business must generally satisfy either a turnover test or a net asset value test, and an asset must be used in carrying on the business, which ensures that the concessions benefit genuine small enterprises rather than large or passive investors.
For business owners who already hold their premises within an SMSF under the BRP rule, the CGT concessions may still play a vital role when they sell their shares or goodwill, allowing them to contribute those proceeds to super under the retirement exemption. For others who continue to own their business property personally, the concessions can still apply to the property.
The ATO provides guidance on the small business CGT concessions, outlining the eligibility tests and how these interact with retirement-related super contributions.
Together, the business real property rule and the small business CGT concessions form a policy continuum, distinct in operation but united in purpose, helping small business owners transition from building wealth through their enterprises to securing it for retirement. They protect entrepreneurs at either end of the journey, ensuring that the risk-takers who drive economic growth are not left exposed when they step back from the business.
A Model That Understands People
Australia’s approach reflects a rare policy sophistication: it doesn’t treat entrepreneurs as potential tax dodgers but as citizens whose risk-taking fuels national prosperity. It recognises that the person who builds a business, takes the lease, signs the loan, hires the staff, is often too busy growing to think about retirement until later in life.
By allowing them to integrate business assets into superannuation and later to transfer sale proceeds efficiently into retirement savings, the law aligns with how people actually live and work. It is a system grounded in both economic pragmatism and human realism.
Small business policy has to incorporate retirement policy. It’s a joint system, not two separate ones. For the millions of Australian business owners who have built their livelihoods brick by brick, this alignment is more than a legislative success. It’s a quiet social contract between the nation and its entrepreneurs: build boldly but retire securely.
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