The seller has had years to prepare the business for sale. You have a few weeks to find out what it's really worth. Due diligence is how you close that gap, and the right time to do it is before the contract becomes unconditional, not after.
This page sets out what we check, the red flags we look for, how to structure the purchase, and the tax and duty points that catch buyers out.
What does due diligence cover when buying a business?
Five areas. We lead the first three and work alongside your solicitor on the rest.
| Area | Who leads | What gets checked |
|---|---|---|
| Financial | BPAG | Sales, margins, expenses, normalised earnings, working capital, stock, debtors |
| Tax | BPAG | Lodgements, ATO debts, GST, payroll tax, Division 7A and losses (on a share purchase) |
| People | BPAG with your solicitor | Award compliance, super, leave balances, contractors, key staff |
| Legal | Your solicitor | Contract, lease, licences, intellectual property, disputes, warranties |
| Commercial | You, with our input | Customers, suppliers, competitors, why the seller is really selling |
business.gov.au has a useful overview of buying an existing business. What follows is the accountant's part in detail.
What should a due diligence checklist include?
This is the financial and tax checklist we work through. Use it to know what to ask the seller for.
| Check | What we ask for | Red flag |
|---|---|---|
| Sales are real | Three years of financials, BAS, bank statements, sales reports | Sales in the accounts don't match deposits or BAS |
| Profit is real | General ledger, owner's wages and personal expenses | Owner works 70 hours a week for no wage; add-backs that aren't one-off |
| Margins are stable | Monthly profit and loss, gross margin by product or service | Margin falling, or a jump in the year before sale |
| Customers | Sales by customer | One customer over a fifth of revenue, or on no contract |
| Working capital | Aged debtors, aged creditors, stock count | Old debtors counted as good; stock that won't sell |
| Tax lodged and paid | ATO statements, tax returns, BAS, payroll tax returns | Unlodged returns, ATO debt, payment plans |
| Payroll and super | Payroll reports, award classifications, super payments | Underpaid staff, late or missing super, contractors who look like employees |
| Leave liabilities | Leave balances by employee | Large balances that will transfer to you |
| Premises | Lease, options, outgoings | Short remaining term, no option, assignment needs landlord consent |
| Assets | Asset register, finance agreements | Equipment on finance or owned by someone else |
What does a red-flag register look like?
Every finding goes into one table, ranked by what it could cost you and what we recommend. It's the document your solicitor and you use to negotiate. A shortened, hypothetical example:
| # | Finding | Severity | Estimated exposure | Recommendation |
|---|---|---|---|---|
| 1 | Two staff appear underpaid against the award for the past two years | High | Back pay plus super; quantified once payroll records are received | Price reduction or specific indemnity; seller to rectify before completion |
| 2 | 38% of revenue from one customer, no written contract | High | Unquantified: depends on the customer staying | Earn-out or deferred payment tied to that customer |
| 3 | Lease has 14 months left and no option | Medium | Relocation or higher rent | Condition: new lease or option agreed with the landlord before completion |
| 4 | Owner's wage not in the accounts | Medium | Reduces true earnings by a full-time manager's cost | Re-base the price on normalised earnings |
| 5 | BAS for one quarter lodged late | Low | Minimal if paid | Confirm cleared at settlement |
Our business purchase due diligence agent drafts this register from the documents the seller provides, flagging tax exposures and gaps in the information. Our award underpayment agent checks pay against the award; our commercial lease agent pulls out key dates, options and consent requirements. A qualified accountant verifies every item before it reaches you, and nothing in the register is treated as settled until it's confirmed.
Should you buy the assets or the shares?
| Asset purchase | Share purchase | |
|---|---|---|
| What you get | The assets and contracts you choose | The whole company, with its history |
| Past tax, super and legal liabilities | Generally stay with the seller | Come with the company |
| Tax losses | Stay with the seller | May be usable, but only if strict continuity tests are met after a change of ownership |
| Division 7A history | Stays with the seller | Comes with the company |
| Depreciation | Fresh cost base, allocated across assets | Existing tax values continue |
| GST | Usually GST-free if a going concern; otherwise 10% | No GST on shares |
| Stamp duty | Depends on the state and what's included | Landholder duty if the company holds enough land |
| Licences and contracts | May need consent to assign | Usually stay in place, subject to change-of-control clauses |
Most small business purchases are asset purchases. If you're buying shares, due diligence needs to go further back and the warranties and indemnities in the contract carry more weight.
What entity should you buy the business through?
Decide this before you sign. Changing the buyer after exchange, or moving the business between entities after completion, can mean paying duty twice and triggering tax.
Common setups:
- A new company to trade the business, which limits your liability and has a 25% tax rate if it's a base rate entity.
- A family trust owning the shares in that company, so future profit can be distributed across the family.
- A separate entity for any premises, so the property isn't exposed to trading risk.
The right answer depends on the size of the business, your other income and assets, your family and whether you'll bring in partners. Our business structure advice service covers setting this up, and our guide to company vs trust vs sole trader explains the trade-offs. Make sure the contract names the right entity as buyer, or allows a nominee.
Is GST payable when you buy a business?
Not if the sale is a GST-free supply of a going concern. The conditions:
- You (the buyer) are registered or required to be registered for GST.
- The seller supplies everything necessary to continue operating the business.
- The seller carries on the business until the day of the sale.
- You and the seller agree in writing that the sale is of a going concern.
If any condition fails, GST is generally payable on the price and you'll need the cash to pay it at settlement, claiming it back on your next BAS. If the sale includes property, other GST rules can apply, including GST withholding at settlement; see our guide to GST on property.
Do you pay stamp duty when buying a business?
It depends on the state and what you're buying.
- Land and buildings are dutiable in most states and territories, though not all: South Australia, for example, no longer charges duty on commercial and industrial land.
- Goodwill and other non-land business assets are no longer dutiable in most states, but some still charge duty on certain business assets. We check the rules for the state where each asset is.
- Shares or units in an entity that holds land can trigger landholder duty, calculated on the value of the land, once the entity's land and your interest pass the state's thresholds.
Landholder duty thresholds differ widely, as at 2026–27:
| State | Landholding threshold | Interest that triggers duty (private entity) |
|---|---|---|
| NSW | $2 million or more | 50% (20% for a private unit trust) |
| VIC | $1 million or more | 50% for a private company (20% for a private unit trust) |
| QLD | $2 million or more | 50% |
| SA | No value threshold; residential and primary production land only | 50% |
| WA | $2 million or more | 50% |
| TAS | $500,000 or more | 50% |
| ACT | No value threshold stated | 50% |
| NT | $500,000 or more | 50% |
Our state taxes service covers duty, payroll tax and land tax in detail. One point buyers often miss: once you own the business, its wages may be grouped with your other businesses for payroll tax, which can push you over the threshold.
How does buying a business work with BPAG?
- Free strategy call. Before you make an offer if possible. We'll tell you what to ask for and how long due diligence should run.
- Structure first. We recommend the buying entity and set it up, including ABN, GST registration and a Xero file, so it's ready at settlement.
- Information request. We send the seller's broker a document list and track what's outstanding.
- Due diligence. Financial, tax and payroll review, the red-flag register and normalised earnings.
- Finance and forecast. A forecast for the first 12 to 24 months under your ownership, including the loan. Our loan calculator agent tests whether the repayments are affordable if sales dip.
- Contract input. We brief your solicitor on price adjustments, indemnities, the going concern clause, stock and employee entitlement adjustments.
- Settlement and day one. Opening balance sheet, payroll set up with Payday Super, BAS registration and a 100-day plan.
BPAG runs on Nagaris. Its agents draft the register, the analysis and the forecast; qualified accountants review and sign off, and nothing is sent to you, the seller or your solicitor without a person approving it. Your documents are stored in Australia.
"It's been wonderful working with the BPAG team! They are true experts and have provided incredibly valuable business advisory and tax services, helping my business grow." Mitchell King, Google review
What does due diligence cost?
We quote a fixed fee once we've seen the size of the business and whether it's an asset or share purchase. You'll know the cost before we start. After settlement, most buyers move onto one of our fixed-price plans; see our pricing page.
An honest point: for a very small purchase, such as a sole trader business with a few thousand dollars of equipment and no staff, a full due diligence engagement may cost more than it saves. A one-hour review of the seller's BAS, bank statements and lease may be enough. We'll tell you which you need.
What should you send us?
- The information memorandum or broker's summary
- Three years of the seller's financial statements, tax returns and BAS
- Bank statements matching the same periods (ask for them; they are the best test of sales)
- Monthly profit and loss for the last 12 to 24 months
- Payroll summary, staff list with classifications and leave balances
- The lease and any key contracts
- Asset register and finance agreements
- Your offer, heads of agreement or draft contract
- Your own financial position, if you're borrowing to buy
We work with buyers in many sectors, including franchisees, hospitality and trades and construction. If you're on the other side of a deal, see selling a business.
Frequently asked questions
How long does due diligence take when buying a business?
For a small business with organised records, two to four weeks is common. Larger businesses, share purchases and businesses with property or many staff take longer. The real constraint is usually how quickly the seller provides information, so build a realistic due diligence period and a right to extend it into the contract.
Can I get my deposit back if due diligence finds a problem?
That depends entirely on the contract. If the deposit is refundable and the contract is conditional on satisfactory due diligence or finance, you can usually withdraw within the period. If not, you may lose it. Have your solicitor make the contract conditional before you pay anything substantial.
What are the biggest red flags when buying a business?
Income that doesn't match the bank statements or BAS, a large share of revenue from one or two customers, staff underpaid against the award, a lease that ends soon or can't be assigned, and an owner the customers only deal with personally. Any one of these isn't necessarily a reason to walk away, but each should affect the price or the terms.
Should I buy the shares or the assets?
Buyers usually prefer an asset purchase, because you choose what you take on and leave most past liabilities with the seller. A share purchase means you inherit the company's history, including any tax, super or legal problems. Sometimes a share purchase is unavoidable, for example to keep licences or contracts, and then due diligence and warranties matter even more.
Do I need an accountant and a lawyer?
Yes. We do the financial and tax due diligence, the structure and the finance numbers. Your solicitor reviews and negotiates the contract, the lease, warranties and indemnities, and handles settlement. The two pieces of work feed each other, and we brief your solicitor directly on what we find.
How is the business valued?
Most small businesses are priced on a multiple of normalised earnings: profit adjusted for the owner's real wage, one-off items and personal expenses run through the books. The multiple depends on risk, growth and the industry. We test the earnings figure the price is built on, because that's where most overpricing hides.
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.