Selling a business is usually the biggest tax event of an owner's life, and most of the outcome is decided before the contract is signed. The deal structure, the price allocation, the GST treatment, the timing and the paperwork all change what you keep.
This guide explains how the sale of a business is taxed in Australia, asset sale versus share sale, GST, the restraint of trade and earn-out traps, and how the capital gains tax changes from 1 July 2027 affect your timing. Those changes are law, under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026.
Do you pay tax when you sell a business in Australia?
Yes, almost always, but not all of the price is taxed the same way. A business sale is really the sale of a bundle of assets, and each kind of asset has its own rule.
| What's being sold | How it's taxed for the seller |
|---|---|
| Goodwill | Capital gain. Usually close to nil cost base if you built the business |
| Business premises (land and buildings) | Capital gain, with the cost base reduced by capital works deductions claimed |
| Plant, equipment and vehicles | Not CGT. A balancing adjustment: price over written-down value is assessable income; under it is a deduction |
| Trading stock | Ordinary income at the price (or market value) received |
| Debtors, work in progress | Ordinary income, usually already counted, or as collected |
| Intellectual property, licences, contracts | Usually CGT assets; some are depreciating assets with balancing adjustments |
| A separately priced restraint of trade | Usually a new CGT event, with no discount and no small business concessions (see below) |
| Shares in the company that owns the business | Capital gain for the shareholder; the company's assets don't change hands |
Capital gains can be reduced by the CGT discount (for growth before 1 July 2027), indexation (for growth after), and the small business CGT concessions. Ordinary income can't.
Asset sale or share sale: which is better for tax?
There are two ways to sell a business run through a company or trust. You can sell the assets (the entity sells its goodwill, plant and stock), or the owners can sell their shares or units (the buyer takes over the entity itself).
| Asset sale | Share sale | |
|---|---|---|
| Who sells | The company or trust | The shareholders or unitholders |
| Who pays the tax first | The entity | The owners personally |
| CGT discount (pre-2027 growth) | Not available to a company. Available to a trust and its individual beneficiaries | Available to individual shareholders and trusts holding at least 12 months |
| Small business concessions | Tested at the entity level | Extra tests: significant individual, concession stakeholders, 80% active asset look-through |
| Getting cash to the owners | Second step needed: dividends, liquidation, or concession-exempt payments | Cash goes straight to the owners |
| GST | Often GST-free as a going concern if conditions are met; otherwise taxable | No GST (shares are financial supplies) |
| Buyer's preference | Usually preferred: fresh start, no history, depreciation on stepped-up values | Takes on the company's tax and legal history |
| Due diligence | Lighter | Heavier, with warranties and indemnities |
| Stamp duty | On dutiable assets, varies by state | On shares only in some cases, mostly landholder rules |
For a company-owned business, the difference can be large. A company pays tax on the full gain with no discount, at 25% or 30%. Then getting the money out to you raises a second layer: franked dividends taxed at your rate, or a liquidation. A share sale lets individual shareholders use the discount (on pre-2027 growth) and the small business concessions directly.
That's why sellers usually prefer a share sale and buyers usually prefer an asset sale. The price often moves to reflect it. Know your number both ways before negotiating.
Key point: For a trust-owned business, the gap is usually smaller. A trust can access the discount and the concessions, and pass the result to beneficiaries. The proposed 30% minimum tax on discretionary trusts from 1 July 2028 is in the Tax Reform No. 3 Bill 2026, introduced on 14 October 2026. It's a Bill, not law.
How much capital gains tax will you pay on the sale?
Your capital gain on each CGT asset is the price allocated to it, less its cost base. For a sale with a contract signed before 1 July 2027, the current rules apply. For a contract signed on or after 1 July 2027:
- Growth up to 30 June 2027 is calculated as if you sold and bought back the asset at that date, and keeps the 50% discount (for individuals, trusts and partnerships holding at least 12 months).
- Growth after that date gets CPI indexation of the cost base instead of the discount.
- Resident individuals pay at least 30% on the post-2027 real gain. People already on a 30% or higher rate aren't affected, and recipients of certain income support payments in that year are exempt.
- Companies are taxed as before. Super funds keep their one-third discount.
- The four small business CGT concessions are retained, and from the income year that includes 1 July 2027 the 50% active asset reduction opens to businesses with turnover under $10 million.
To split pre- and post-2027 growth, you'll generally need the asset's market value just before 1 July 2027, or the apportionment method the Government is developing. For a business you plan to sell after 2027, a goodwill valuation at 30 June 2027 is worth getting. Our guide to the CGT discount changes from 1 July 2027 goes through the mechanics.
The small business CGT concessions
Most small business owners selling an active business qualify for at least one of the four concessions: the 15-year exemption, the 50% active asset reduction, the retirement exemption and the rollover. Together they often reduce the gain on goodwill to nil. You need turnover under $2 million or net assets of $6 million or less, plus the active asset test. Our full guide to the small business CGT concessions has the conditions and a worked example.
Worked example: allocating the sale price
Hypothetical, rounded. A company-owned café sold as an asset sale. Contract signed before 1 July 2027.
Say the buyer pays $600,000 and the contract allocates the price like this:
| Item | Price | Seller's cost or written-down value | Taxed as | Taxable amount |
|---|---|---|---|---|
| Goodwill | $380,000 | Nil | Capital gain | $380,000 |
| Kitchen equipment and fit-out | $150,000 | $110,000 | Balancing adjustment (income) | $40,000 |
| Trading stock | $20,000 | $20,000 | Ordinary income (offset by stock cost) | $0 net |
| Restraint of trade, priced separately | $50,000 | n/a | New CGT event, no discount or concessions | $50,000 |
| Total | $600,000 | $470,000 |
The company pays tax on $470,000 unless the concessions reduce the goodwill gain. The company can't use the 50% CGT discount, but if it passes the basic conditions, it can use the 50% active asset reduction (halving the $380,000) and potentially the retirement exemption through a significant individual. The $50,000 restraint gets none of that.
Now restructure the same deal: fold the restraint into the goodwill price (with the restraint given as part of the goodwill sale and no separate price), and the $50,000 becomes eligible for the concessions. And if the owners sold their shares instead, the gain would sit with them personally, where the discount on pre-2027 growth is available too.
These choices are worth tens of thousands of dollars. They have to be agreed with the buyer, written into the contract, and consistent with what really happened.
Is GST payable on the sale of a business?
Not if the sale qualifies as a GST-free supply of a going concern. Otherwise, GST applies to the taxable parts of the sale (goodwill, plant, stock and commercial property), and the buyer can usually claim it back if registered.
For a going concern, all of these must be true:
- The sale is for payment (consideration).
- The buyer is registered, or required to be registered, for GST.
- You supply everything necessary for the business to keep operating, such as premises (or a lease), equipment, goodwill and staff arrangements where relevant.
- You carry on the business until the day of settlement.
- You and the buyer agree in writing that the sale is of a going concern, usually in the contract.
If any condition fails, GST is payable on the taxable supplies. If the contract price was GST-inclusive, you bear it. If it says "plus GST", the buyer pays more at settlement. Get the clause right.
A share sale has no GST, because shares are financial supplies. If the business sale includes commercial property or new residential property, see our guide to GST on property sales.
How are restraint of trade payments and earn-outs taxed?
Restraint of trade
Buyers usually want you to agree not to compete for a period and area. If the restraint is part of the sale of goodwill and isn't separately priced, the whole amount is generally part of your capital proceeds for goodwill. If the contract gives the restraint its own price, the ATO may treat it as you creating a new right in the buyer (CGT event D1). That kind of gain gets no CGT discount and no small business concessions. Draft it carefully.
Earn-outs
An earn-out is part of the price paid later, depending on how the business performs after the sale. For qualifying arrangements, the look-through earn-out rules treat later payments as part of the original sale price, rather than as a separate asset. To qualify, the earn-out must relate to an active asset of the business sold, be made at arm's length, and the payments must end within five years after the end of the income year of the sale. Each payment then adjusts the original year's gain, which may mean amending that return.
If the earn-out doesn't qualify, the right to future payments is a separate asset that must be valued at sale, with a separate gain or loss later. That's messier and can mean paying tax on money you never receive.
With the 2027 changes, an earn-out that straddles 1 July 2027 needs careful handling. The CGT event date is usually the contract date, so a contract signed before 1 July 2027 generally keeps the current rules for the whole sale, including later earn-out payments that adjust it. Confirm this against the final ATO guidance for your facts.
When should you sell? Timing and the 2027 changes
The contract date usually sets the date of the CGT event, and therefore the financial year and the rules that apply, even if settlement is later.
| Timing choice | What it changes |
|---|---|
| Contract before 1 July 2027 | Current rules: 50% discount on the whole gain (individuals and trusts, held 12+ months), no 30% minimum tax |
| Contract on or after 1 July 2027 | Discount on growth to 30 June 2027; indexation and the 30% minimum tax on growth after |
| Contract early or late in a financial year | Moves the tax into a different year, changes your tax instalments and when you pay |
| Selling across two years | Can spread ordinary income, but capital gains aren't averaged; losses must be applied in the order the law sets |
| Retiring at 55 or later | May open the 15-year exemption and remove the super requirement for the retirement exemption |
| Holding the business 15 years | May open the 15-year exemption, which wipes out the whole gain |
Rushing to sign before 1 July 2027 is not automatically right. If most of the business's growth has already happened, the snapshot rule protects that growth anyway. A forced sale at a poor price costs more than the tax. The point is to know the difference in dollars before you decide.
Mistakes we see when owners sell a business
- Agreeing a headline price without a tax-effective allocation. The allocation between goodwill, plant, stock and restraint changes the tax for both sides.
- A separately priced restraint of trade that loses the concessions.
- A company selling its assets when a share sale (with concessions available to the owners) would have left more in their hands, or vice versa.
- No plan for getting the money out of the company. Dividends, a liquidation and concession-exempt payments are taxed differently and have deadlines.
- Division 7A loans from the company to the owners left unresolved, which a buyer of shares won't accept and which can become deemed dividends.
- Missing the going concern conditions, such as the business stopping trading a week before settlement, or no written agreement.
- Failing the basic conditions by accident, for example cash and investments building up in the company before a share sale, or a connected business pushing turnover over $2 million.
- No valuation at 30 June 2027 for a business you plan to sell after that date.
- Forgetting the clearance certificate where the sale includes land or buildings. Without it, the buyer must withhold 15% of the property price for the ATO under the foreign resident capital gains withholding rules, even if you're an Australian resident.
What to send us before you sell
- Last two or three years of financial statements and tax returns for the business entity
- Your group chart: every company, trust and partnership you or your family have an interest in
- The asset register: purchase dates and costs for property, plant and any purchased goodwill
- The offer, heads of agreement or draft contract
- Any loan accounts between you and the company or trust
- Details of the 15-year history if you've owned the business that long
- Your age and retirement plans, and whether you'd like to contribute to super
How BPAG helps you sell a business
We work on the tax side of sales every year, from small trades businesses to professional practices. Our selling a business service covers the whole process.
- Modelling before you negotiate. Our capital gains tax agent runs the asset sale and share sale scenarios, the concessions in order, and the before-and-after 1 July 2027 position. Your accountant reviews every assumption and walks you through the result.
- The structure question. If the business should be restructured before it's sold, our restructure rollover agent compares the rollover options. Your accountant decides what fits, and your solicitor documents it. See our business restructuring service.
- Working with your solicitor and the buyer's team. We review the price allocation, GST clause, restraint, earn-out and employee entitlements before you sign.
- After settlement. We prepare the returns, make the concession choices in writing, and plan how the money gets from the business to you. If retirement or estate planning is next, our succession and estate planning service picks it up.
If you're on the other side of the deal, our buying a business service covers due diligence, where our due diligence agent builds a red-flag risk register for your accountant to work through.
"We have been working with Ray and the fantastic team at BPAG Accountants for several years, and it has truly been the best decision for our company… Their invaluable support has saved us a great deal of money and time." Susan McKendry, Google review
The AI agents draft. A qualified accountant reviews and signs off every calculation and every piece of advice. Sale contracts, restraints and transfer documents are prepared by your solicitor, and we work alongside them.
Frequently asked questions
Is goodwill taxed when I sell my business?
Yes. Goodwill is a CGT asset, so the amount allocated to it is part of your capital gain. If you built the business yourself, its cost base is usually close to nil, so most of the goodwill price is gain. It's also an active asset, which is why the small business CGT concessions often apply to it.
Who pays stamp duty when a business is sold?
The buyer usually pays transfer duty, and whether duty applies to goodwill and other business assets depends on the state or territory. Land and buildings sold with the business attract duty everywhere. Check the rules for your state before agreeing the price allocation, because it affects what the buyer is willing to pay.
Do I need to keep records after I sell the business?
Yes. Keep the sale contract, the price allocation, valuations, the records behind your cost base and your concession calculations for at least five years after the CGT event, and longer where an earn-out is still running. If you're relying on a 30 June 2027 valuation for any asset, keep that too.
Can I sell my business to my family trust or company to save tax?
You can, but a sale to a related party is treated as happening at market value, so the gain is the same as selling to a stranger. It can still make sense to use the concessions or a restructure rollover when moving into a better structure, but it needs modelling, including stamp duty.
What happens to my employees' leave when I sell?
In an asset sale, employees' leave either gets paid out by you or transferred to the buyer, with a price adjustment. In a share sale, the employer doesn't change, so the leave stays in the company. How the adjustment is worded affects the tax for both sides, so have it reviewed before you sign.
Does the buyer get a tax deduction for what they pay?
Partly. The buyer can depreciate plant and equipment and claim capital works on buildings based on the price allocated to them, and trading stock becomes their stock. Goodwill isn't deductible. That's why buyers push to allocate more to plant and stock, and why you should check the effect on your own tax before agreeing.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.