Selling your Business and Tax Tips

Selling your business is one of the most significant financial decisions you will ever make. For many owners across Mildura and regional Victoria, the business represents decades of early mornings, late nights and steady risk-taking. When it comes time to exit, the sale price is only part of the story. What truly matters is what you keep after tax.

We have advised tradies, medical practices, transport operators and family-run businesses through this process. The difference between a rushed sale and a planned exit can mean hundreds of thousands of dollars. In this guide, we explain how to prepare properly, structure the deal wisely and use available tax concessions to protect your hard-earned gains.

Why Early Planning Can Increase Your Sale Price

Many owners underestimate how much preparation affects value. Buyers pay more for certainty. They discount risk.

In our experience, starting 12 to 24 months before sale allows you to:

• Improve profitability.
• Clean up financial records.
• Fix structural tax issues.
• Reduce owner dependence.
• Strengthen buyer confidence.

A Practical 24-Month Exit Timeline

Below is a structured approach we recommend.

Timeline	Key Actions
24 Months Before Sale	Review structure, resolve Division 7A loans, separate private assets, assess CGT eligibility
18 Months Before Sale	Build management team, document systems, secure contracts
12 Months Before Sale	Improve margins, remove one-off expenses, prepare adjusted reports
6 Months Before Sale	Obtain valuation, model tax outcomes, engage advisers

We once worked with a regional earthmoving contractor who started planning two years out. By cleaning up his books and reducing owner reliance, he increased his valuation multiple. Preparation paid off.

Making Yourself Redundant

Buyers want a business that can operate without the founder.

If you are the main salesperson, operations manager and decision-maker, buyers see risk. To avoid this:

• Document all key processes.
• Delegate client relationships.
• Train senior staff to handle operations.
• Formalise supplier agreements.

One local irrigation supplier documented quoting systems and supplier pricing structures. The buyer described it as “plug-and-play ready.” That clarity increased the final offer.

Clean Financials Win Buyer Confidence

When buyers conduct due diligence, they examine the numbers closely. Sloppy records slow the process and reduce trust.

Financial Documents Buyers Expect

Most buyers request:

• 24–36 months Profit and Loss statements.
• Balance Sheets.
• Cash Flow reports.
• BAS statements lodged with the ATO.
• Payroll summaries.
• Asset registers.

Clear records send a strong signal that the business is well managed.

Cleaning Up the Balance Sheet

We frequently see issues that can easily be resolved before sale:

• Personal expenses recorded in the company.
• Shareholder loans not properly documented.
• Old equipment overstated in value.
• Division 7A loans creating compliance risks.

Here is a comparison of common red flags and preferred clean positions:

Red Flag	Clean Position
Large undocumented shareholder loans	Loan agreements documented and compliant
Personal vehicle expenses mixed with business	Clear separation of private use
Outstanding ATO debt	Up-to-date tax lodgements and payments
Passive investment assets in company	Non-business assets removed before sale

Addressing these items early protects valuation and concession eligibility.

Adjusted EBITDA: Unlocking True Earnings

Buyers often value businesses using an EBITDA multiple. If unusual expenses reduce reported profit, you may undervalue the business.

Common add-backs include:

• One-off legal costs.
• Above-market owner wages.
• Non-recurring repairs.
• Temporary consulting expenses.

Example:

If reported profit is $400,000 and legitimate add-backs total $50,000, adjusted profit becomes $450,000. At a 4x multiple, that adjustment increases valuation by $200,000.

Small details can have large consequences.

Business Valuation in Australia: Setting the Right Price

Understanding valuation methods prevents unrealistic expectations.

The Three Common Valuation Methods

1. Market Approach
   Compares similar business sales.
2. Asset-Based Approach
   Calculates net tangible and intangible assets.
3. Earnings (EBITDA) Approach
   Applies a multiple to sustainable profit.

Service-based businesses often rely on earnings multiples. Asset-heavy businesses such as manufacturing or agriculture may rely more on asset values.

Avoid Emotional Pricing

Owners sometimes price businesses based on retirement needs. Buyers assess risk, not sentiment.

Buyers examine:

• Customer concentration.
• Industry stability.
• Staff retention.
• Owner dependence.
• Profit consistency.

We have seen businesses remain unsold for over a year because expectations exceeded market value. Pricing realistically attracts serious buyers.

Asset Sale vs Share Sale

Structure significantly affects tax outcomes.

Factor	Asset Sale	Share Sale
What Is Sold	Individual assets	Company shares
Liability Transfer	Seller retains entity	Buyer assumes entity liabilities
GST Impact	May apply unless going concern	Generally no GST
CGT Concessions	Limited in some cases	Often more favourable for seller
Buyer Preference	Often preferred	Sometimes resisted

Always model both options before signing a contract.

Capital Gains Tax Concessions: Reducing Your Tax Bill

Small Business CGT concessions are powerful tools when applied correctly.

Basic Eligibility Tests

You must satisfy either:

• $2 million aggregated turnover test, or
• $6 million net asset value test.

You must also meet the active asset test.

The Four CGT Concessions Explained

1. 15-Year Exemption
   If you owned the business for 15 years, are over 55 and retiring, the gain may be entirely tax free.
2. 50% Active Asset Reduction
   Reduces capital gain by 50%.
3. Retirement Exemption
   Up to $500,000 lifetime exemption. Under 55 requires contribution to superannuation.
4. Rollover Relief
   Defers gain for up to two years when purchasing a replacement asset.

We assisted a long-standing family engineering firm in Mildura that met the 15-year exemption criteria. With proper documentation and timing, their capital gain was exempt. Planning made the difference.

The “June 30” Contract Timing Rule

For CGT purposes, the contract date triggers the event, not settlement.

If you sign on 30 June 2026:

• Gain falls into the 2026 tax year.

If you sign on 1 July 2026:

• Gain falls into the 2027 tax year.

That deferral can provide 12 months of cash flow flexibility. Timing matters.

GST and the Going Concern Exemption

When GST Applies

Asset sales generally attract 10% GST unless the going concern exemption applies.

On a $1 million sale, that is $100,000. That amount affects negotiations.

Requirements for Going Concern Treatment

To qualify:

• The business must operate until settlement.
• Buyer and seller must both be GST registered.
• Contract must state the sale is a going concern.

Always include a GST recovery clause in the contract. This protects you if the ATO later determines the sale does not qualify.

Employee Entitlements: Managing Leave Liabilities

Employee entitlements often reduce the sale price.

These may include:

• Annual leave.
• Long service leave.
• Redundancy provisions.

Accrued Leave Transfer Payment Strategy

Instead of reducing the sale price, you may:

• Pay the buyer the leave liability amount.
• Claim a tax deduction.
• Potentially improve your after-tax position.

Each case requires modelling. Sometimes a direct payment creates a better tax outcome than a price reduction.

The Clean Company Rule for Share Sales

Division 7A Loans and Passive Assets

Division 7A loans can jeopardise CGT concession eligibility if passive assets exceed limits.

To protect eligibility:

• Formalise or repay shareholder loans.
• Remove passive investments.
• Ensure company assets are active business assets.

Removing Private Assets Before Sale

Before marketing the business, remove:

• Investment properties not used in operations.
• Private vehicles.
• Personal investments.

These steps simplify due diligence and strengthen your position.

Navigating the Sales Process

Confidentiality Agreements

Before sharing sensitive information:

• Use a strong NDA.
• Protect customer lists.
• Limit access to pricing data.

Heads of Agreement

A Heads of Agreement typically outlines:

• Agreed price.
• Deposit amount (often 1% non-refundable).
• Due diligence period.
• Key conditions.

This document filters serious buyers from time-wasters.

Due Diligence: What Buyers Examine

During the 4–6 week review, buyers assess:

• Financial accuracy.
• Legal compliance.
• Intellectual property ownership.
• Contract validity.
• Market position.

Maintain strong trading performance during this period. If revenue drops, buyers may renegotiate.

Final Handover Checklist

After settlement, you must address compliance obligations.

Regulatory Requirements

• Transfer licences and permits.
• Cancel ABN within 21 days of ceasing.
• Cancel GST registration.
• Lodge final BAS and income tax returns.

Some licence transfers can take up to 12 months. Plan early.

Employee Communication

You must:

• Provide written termination notice.
• Clarify transfer arrangements.
• Communicate transparently with staff.

Clear communication maintains goodwill and stability.

Selling your business in Australia requires careful preparation. The right structure, timing and tax planning can significantly change your after-tax outcome.

Start planning years in advance. Clean up your structure. Understand your CGT position. Model asset and share sale scenarios. Seek professional advice before signing.

When handled correctly, you can step away with confidence, knowing you protected the value you worked so hard to build.