Tax Implications of Selling a Business

Written by: Lizl Pretorius [Published: 02/09/2026]

How to navigate capital gains tax, GST going concern rules, and ATO final lodgments when exiting your Queensland business.

Ideally the selling of your business should be the rewarding finale of years of hard work, but unexpected tax bills can erode your payout. Planning before you sign a contract can help you understand the tax consequences. Capital gains tax (CGT) and GST are governed by Commonwealth law, while Transfer Duty may apply to some business assets. The sale structure can make a major difference to your final return.

Asset Sale Versus Share Sale Tax Implications

If the business operates through a company, one key question is whether the company will sell the business assets or the shareholders will sell their shares.

Asset sale: The business-owning entity sells the agreed assets. Different tax rules can apply to goodwill, trading stock and depreciating assets. If a company sells the assets, the proceeds remain in the company and further tax consequences may arise when money is later distributed to shareholders.
Share sale: The shareholder sells their shares while the company keeps the underlying business assets. This will trigger CGT for the shareholder(s). The outcome depends on whether the shareholder is an individual, trust, company or another entity.

Sole traders, partnerships and trusts require different analysis, so these two options do not apply to every business structure.

For CGT assets such as goodwill or shares, the basic calculation compares the capital proceeds with the asset’s cost base. A capital gain may arise where the proceeds exceed that cost base. Other parts of the sale can be taxed differently. Trading stock is normally dealt with under ordinary income tax rules, while depreciating assets can trigger balancing adjustments.

The Income Tax Assessment Act 1997 governs the federal income tax consequences.

How Do Small Business CGT Concessions Work?

Division 152 of the Income Tax Assessment Act 1997 contains four small business CGT concessions that may reduce, defer or eliminate a qualifying capital gain.

Under the current rules, small business entities need to satisfy the active asset test and an eligibility pathway. This can include aggregated turnover of less than $2 million or net assets of $6 million or less. Connected entities and affiliates can affect these calculations.

The four concessions are:

15-year exemption: Eligible taxpayers may disregard a qualifying gain after owning the asset for at least 15 years. For an individual, the event must generally be connected with retirement at age 55 or older, or permanent incapacity.
50% active asset reduction: This reduces a qualifying capital gain by 50%. Eligible individuals and trusts may also qualify for the general CGT discount before 1 July 2027. Companies do not qualify for the 50% discount.
Retirement exemption: You may disregard up to $500,000 of qualifying gains over your lifetime. You do not have to retire to ustilise this exemption. If you are under 55 just before making the choice, you need to contribute the exempt amount to superannuation or a retirement savings account.
Small business rollover: This may defer all or part of a qualifying gain for at least two years. The deferral can continue if you acquire a replacement active asset or make a qualifying capital improvement.

The active asset test generally requires the asset to have been active for at least half of the relevant test period if you owned it for 15 years or less. If you owned it for more than 15 years, it should be an active asset for at least 7.5 years.

Changes From 1 July 2027

Enacted reforms will change some CGT rules from 1 July 2027. In particular, the aggregated turnover threshold for the small business 50% active asset reduction will increase from $2 million to $10 million. Changes to the general CGT discount will also apply.

If you expect to sell after 30 June 2027, obtain advice based on the rules applying to your transaction. We would also suggest that you obtain a property valuation as of 30 June 2027 if you continue to own the asset after this date.

Selling a Business as a Going Concern for GST

Under section 38-325 of the A New Tax System (Goods and Services Tax) Act 1999, a supply of a going concern can be GST-free if all statutory conditions are met.

The sale must be for a consideration and the buyer must be registered or required to be registered for GST. The parties must also agree in writing that the supply is of a going concern. The seller must supply everything necessary for the continued operation of the enterprise and carry it on until the day of supply.

Not every asset or contract must be transferred. However, failing to supply something essential, such as a necessary lease or license, can put the GST-free treatment at risk.

Earn-out payments may affect the sale consideration and CGT calculation. A family transfer is not automatically tax-free and may involve CGT, GST, and Transfer Duty.

Review the GST clause before signing. If the sale of the business as a going concern later fails, the selling entity may face a GST liability. Whether the seller can recover extra GST from the buyer will depend on the contract wording.

Final ATO Lodgments and Employee Superannuation

Selling a business does not always mean the entity itself will close. If the entity stops operating, final tasks may include:

lodging outstanding BAS and the final income tax return;
cancelling GST registration within 21 days if it is no longer required;
cancelling the ABN within 28 days if the entity no longer needs it;
cancelling PAYG withholding registration where appropriate;
finalising Single Touch Payroll information for employees; and
keeping the required business records.

If the entity continues after the sale, some registrations and reporting obligations may remain.

Final Payroll and Payday Super

Payday Super applies from 1 July 2026. Employers need to ensure super guarantee contributions reach an employee’s fund within seven business days after payday and must continue to meet SuperStream and Single Touch Payroll requirements.

Late super can trigger the Superannuation Guarantee Charge. Company directors may also become personally liable for unpaid amounts under the director penalty regime.

If employees finish work or transfer to the buyer, separate workplace obligations may apply. These can include notice, final pay and rules about employee entitlements when a business changes hands.

Keeping your financial records and registrations up to date can make the handover easier.

Contact Us

Exiting a business can involve income tax, GST, Transfer Duty, employee obligations and final ATO registrations. The sale structure can materially affect the tax outcome.

Eligible owners may be able to use the small business CGT concessions, while some transactions can qualify as a GST-free going concern. With Payday Super now in effect and further CGT changes starting from 1 July 2027, planning before signing the sale contract can help identify potential liabilities early. Our Accounting & Tax team can provide advice for your specific circumstances and any final arrangements that need to be made, contact our team today.

Sources

Disclaimer: This article provides general information only and does not constitute financial advice. It does not take into account your personal circumstances and should not be relied on as a substitute for professional financial advice. This article contains general tax information only. Tax outcomes depend on individual circumstances. You should seek advice from a registered tax agent before making financial decisions. For advice about your specific situation, please contact Greenhalgh Pickard on (07) 5444 1022 to speak with our accounting team.