The active asset test decides whether the thing you are selling counts as a genuine business asset for the small business CGT concessions, rather than just an investment that happened to make money.
Technically, it is a requirement under Division 152 of the Income Tax Assessment Act 1997 (Cth) that the asset being sold must have been used in carrying on a business for at least half the period you owned it, or at least 7.5 years if you owned it for more than 15 years.
This is only one of several conditions that all have to be satisfied together for the concessions to apply. Passing the active asset test does not by itself secure the concessions, but failing it rules them out regardless of anything else.
What you as a seller should ask your tax adviser: does the asset structure of the business, including any assets held outside the trading entity such as property, affect whether the active asset test is satisfied, and has this been checked well before you sign anything.