What are the tax implications if you sell your business?

There are many tax issues you may need to consider when selling your business which include:

  • Goods & Services Tax (GST): 
    The sale of a going concern, such as a continuing business, will be GST free if certain conditions are satisfied. However, there may be GST implications when you dispose of your capital assets. If you are registered for GST, you may need to include it in the price of individual business assets you sell.
  • Capital Gains Tax (CGT): 
    CGT is a tax charged on capital gains that arise as the result of the sale or disposal of assets. The Australian Tax Office (ATO) provides information on how to calculate a capital gain and the various CGT concessions available that may reduce your CGT liability when selling a business.
  • Private expenses: 
    When buying or selling a private company, any advances, loans and debts forgiven by private companies to shareholders and shareholders' associates may be treated as dividends under Division 7A of Part III of the Income Tax Assessment Act 1936 .
  • Superannuation: 
    Significant changes to the superannuation system may influence what you do with the proceeds from the sale of your business. Familiarise yourself with these changes by reading the information available on the ATO website.
  • Finalising employee/independent contractor obligations:
    Employers need to consider finalising important tax issues such as fringe benefits tax (FBT), pay as you go (PAYG), superannuation, and eligible termination payments for their employees and independent contractors, even though the business has ceased trading or has been sold.
  • Record keeping obligations:
    You must keep your business records including sales and purchases, the sale of your business, payments to employees, and payments to other businesses for five years even though you have sold the business.
  • Lodging final income tax returns:
    If a partnership has ceased trading and the all assets have been distributed during the year, notify the ATO on the final tax return lodged for the partnership.

A company ceases to exist when all assets are disposed of and it is formally deregistered with the Australian Securities and Investments Commission (ASIC). Notify the ATO on the final tax return if there will be no requirement for the company to lodge tax returns in future years.

  • Cancelling registrations:
    If you have an ABN , you need to notify the ATO within 28 days of ceasing business. Cancelling an ABN will also cancel some other registrations with the ATO .

Financial advice: You should also talk to your accountant or financial advisor about the consequences of selling your business in relation to your particular financial circumstances.

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