DISCUSS THE TAX IMPLICATIONS WITH YOUR ACCOUNTANT
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, may be GST free if certain conditions are satisfied (subject to tax legislative changes). However, there may be GST implications when you dispose of your capital assets.
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.
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.
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.
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.
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.
When you close your business, you need to settle any outstanding amounts. Honour your ATO and State record keeping obligations; lodging final income tax returns; and cancelling registrations.
OBTAINING PROFESSIONAL ADVICE
Common issues to pre-consider when selling your business include:
- goods and services tax exemption on going concern businesses sales;
- capital gains tax;
- private expenses;
- finalising employee/independent contract or obligations
Get advice from your accountant or financial advisor on how the sale of the business will impact on your particular financial circumstances.