Tax on sale of businesses

It is important that vendors and purchasers consider the taxation implications of business sale transactions. With our vast experience in acting for business vendors and purchasers Australia-wide, we are able to assist vendors and purchasers in business sales to ensure that vendors and purchasers understand their taxation obligations.

Capital Gains Tax (CGT)

CGT is a tax payable on a capital gain made from the sale of a capital asset which was acquired after 20 September 1985, minus the cost base. The ‘cost base’ is the amount originally paid for an asset as well as costs associated with acquiring, holding and disposing of the asset. Capital assets can include real estate, shares, contractual rights, and goodwill. CGT will not apply to any motor vehicles or depreciating assets that are only used for taxable purposes.

The most common CGT event occurs when an asset is sold or disposed of. Other CGT events include selling shares, transferring a CGT asset to a trust, creating a CGT asset (e.g. s contractual right), and receiving a forfeited deposit. It is important to know which type of CGT event applies to a particular situation, as the methods for calculating a gain or loss for taxation purposes will depend on the type of CGT event.

There are a range of CGT concessions and discounts which may help business sale vendors reduce their liability for CGT. Depending on the type of entity holding the asset, the taxable gain can be reduced to 50% if a capital asset has been held more than 12 months. A range of concessions and discounts are available for small business owners. If you need advice on your potential CGT liability flowing from the sale of your business, contact us on (02) 4929 7002 or at enquiries@butlers.net.au. We can assist with advising on the structure of the transaction, and applicable discounts and concessions which can reduce your CGT liability.

GST

As a sale of business often involves a range of assets (including goods, services and other taxable supplies), GST can often apply. Please click here for more information on GST.

Income

It is important that income taxation implications are considered as part of the transaction. In some circumstances, the vendor may decide to continue working as a contractor or employee of the business after completion of the sale. The vendor may also continue to earn an income if they own the premises which are leased to the purchaser.

Taxation of business sales can be complicated, but we aim to take the guesswork out of it for you. To talk to our experienced taxation and business sale lawyers call us on (02) 4929 7002, or email us at enquiries@butlers.net.au.

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