Tax on Selling a Business in Australia

When you sell a business in Australia, there are several things you need to know about tax on selling a business.

It is always recommended that you work with your Accountant even prior to the actual sale of your business to know what your responsibilities and obligations will be.

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Taxes When You Are Selling Your Business In Australia

GST

GST does not apply on the sale of a going concern (a business that is operating and making a profit). As the seller, you may also be able to claim input tax credits for GST you paid on expenses relating to the sale. As the seller, you may also be able to claim input tax credits for GST you paid on expenses relating to the sale. Further information for Goods and Services Tax Ruling (GSTR 2002/5) can be seen here: https://www.ato.gov.au/law/view/document?Docid=GST/GSTR20025/NAT/ATO/00001&PiT=99991231235958

Capital Gains Tax (CGT)

Capital Gains Tax (CGT) is tax payable on the sale of your business if you have made a gain from the original cost price of your business (this could be your original purchase price or original set-up cost of your business (Cost Base). The transaction date of the contract of sale is the date used and CGT would be payable by that same financial year’s end. (This only applies to assets acquired after 20th September 1985 (with some exceptions). See further information here: https://www.ato.gov.au/Business/Capital-gains-tax-for-business-assets/ Check our available packages to sell your business

Small business CGT concessions

There are 4 small business CGT concessions which may allow you to reduce, disregard or defer some or all of a capital gain from an active asset sale. Small business 50% active asset reduction Small business 15-year exemption - You will not pay CGT when you dispose of an active asset if you meet both of the following additional requirements: you are aged 55 years or older and retiring, or are permanently incapacitated you have continuously owned the asset for at least 15 years. You may be able to contribute amounts to your super fund from the small business 15-year exemption without affecting your non-concessional contributions limits. Small business retirement exemption - Capital gains from the disposal of active assets are exempt from CGT up to a lifetime limit of $500,000. If under 55, the exempt amount from the proceeds on disposal of the asset must be paid into a complying super fund or a retirement savings account. Small business rollover - The small business rollover allows you to defer all or part of a capital gain made from a CGT event happening to an active asset. For example, you can defer your capital gain until a later year if you buy a replacement asset or improve an existing active asset. See further information here from the Australian Taxation Office website: https://www.ato.gov.au/business/small-business-entity-concessions/concessions/cgt-concessions/#The4smallbusinessCGTconcessions

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