Tax Implications When Selling a Business

When selling a business there are many considerations that need to be taken into account. The sale of arguably your largest asset can be an emotional roller coaster, hence being well prepared will assist you through the entire process.

Prior to listing your business for sale, it is vital that all tax implications are understood when conducting the business valuation. This is a crucial step to take before the business is sold, as there can be unintended tax consequences which only emerge at contract stage. These consequences could have a potentially adverse outcome for the Seller – or could prevent the Buyer from settling the deal.

 Examples of possible tax issues could include:

  • Value of fixed assets included in the sale – It is important that during the asset valuation, that the depreciated value of the fixed assets be considered. This will both impact the Seller and the Buyer and therefore, it is important to accurately value the included assets at their written down value. If the assets are valued higher than the balance sheet values, there may be a depreciation write back with tax implications for the Seller.
  • GST requirements – GST may apply to your business sale, depending on the structure of the agreement. If GST applies, then the purchase price will be impacted by an additional 10% at time of settlement, however this can be claimed at the Buyer’s next BAS report so it’s really a cash flow implication.
  • Capital Gains requirements – There is the possibility for capital gains taxes to be paid depending on the circumstances of the business and the individual shareholders. There may be ways for capital gains tax to be minimised prior to sale, however it is important to discuss any capital gains requirements with your accountant prior to listing your business on the market.

Alongside the above points, there are further things to consider that we urge you to discuss in detail with your accountant prior to listing your business for sale. Core Business Brokers are also able to provide a detailed guide as to how the entire process will work so that the Seller has a proper understanding of the process and timing which will reduce the potential for error and thus allow all parties to have a clearer understanding of the process. Our goal is to facilitate a smooth, efficient and successful business sale process from start to finish.

If you are thinking about listing your business for sale and would like to discuss the process with a professional, contact Core Business Brokers today on (02) 9413 2977 / [email protected] Our skilled team of Business Brokers have years of knowledge and business sale experience to draw from and a team of professional connections to put you in touch with to make your business sale process as successful as possible.