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What you should consider before selling or closing your business:

  • You should familiarise yourself with your responsibilities as a business owner.
  • Speak to us today before you make this decision.

Selling or closing your business has probably passed your mind on a few occasions throughout your business journey. Before you jump ship and decide to head down that road; you decide to transition to retirement, return to the workforce; whatever your reasons may be. It’s worthwhile to understand the reason behind your decision and know exactly what your taxation requirements and obligations are if you proceed. There may be countless of reasons why you have considered this; it could be:

  • The business makes not enough money, and no longer profitable.
  • You are finding it difficult to remain compliant with government regulations.
  • You have come to a road block in your journey and lost the enthusiasm to continue.
  • You have decided the business has achieved its intended purpose.
  • You have reached the age of retirement and it’s finally time to close this chapter in your life.

It’s a good to know exactly and find clarity to what your motives are and look back to the reason why you initially started your business. The reason behind your decision will be the first questions a potential buyer will ask. Ensure you explore all your possible options available to make the right decision, as it could be potentially a costly or a regretful one.

Firstly, consult your close circle of friends and family to provide advice and use them as a soundboard. More importantly, seek an independent professional, such as your Solicitor or your Accountant for legal and taxation advice or business coaching service.

The Australian Taxation Office has developed a series of videos to help you understand your regulatory obligations when selling or closing a business. The guide is not exhaustive, but seeks to be a starting point for recurring topics pertinent to the sale or closing a business, including:

  • Goods and services tax (GST);
  • Capital gains tax (CGT);
  • Superannuation;
  • Winding up a company;
  • Record keeping and lodgement obligations; and
  • Cancelling registrations.

The guide notes that GST implications may arise following the disposal of capital assets and business owners should familiarise themselves with the treatment of such transactions.

The Tax Office highlights the availability of various CGT concessions to small business owners and the appropriate application of the concessions may minimise CGT liabilities when selling a business.

Click here to read what small business CGT concession you could be eligible for.

You will still have to carry out your obligations as a business owner, even after the closure. You may still be required to complete an activity statement for the tax period in which their registration is cancelled.

PAYG instalment obligations may still exist until the date of business cessation and instalment activity statements may be received even after the cancellation of the Australian business number (ABN).

Lastly, the Tax Office has developed a structured checklist to assist business owners in meeting their requisite tax obligations when selling or closing their business.

Click here to access the checklist.

This article was written on 18/02/2016 and is current as at that date.

References:

Sell or close a business – investigate – YouTube. 2016. 1. Sell or close a business – investigate – YouTube. [ONLINE] Available at: https://www.youtube.com/watch?v=kyhPrgpwnqE&list=PL5-ESUNqws-Owwkg7EoQcVcC3DSRJDbAW. [Accessed 17 February 2016].

Selling or closing your business – things to consider | Australian Taxation Office . 2016. Selling or closing your business – things to consider | Australian Taxation Office . [ONLINE] Available at: https://www.ato.gov.au/Business/Starting-your-own-business/In-detail/End-a-business/Selling-or-closing-your-business—things-to-consider/?anchor=Checklist#Checklist. [Accessed 17 February 2016].

Small business CGT concessions | Australian Taxation Office . 2016. Small business CGT concessions | Australian TaxationOffice . [ONLINE] Available at: https://www.ato.gov.au/General/Capital-gains-tax/CGT-exemptions,-rollovers-and-concessions/Small-business-CGT-concessions/. [Accessed 17 February 2016].

This article is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this article. All information is subject to change without notice. We and each party providing material displayed in this article disclaim liability to all persons or organisations about any action(s) taken by currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your enquiries before entering into any transaction by the information or material in this article. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

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