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Tax Consequences When You Sell Your Business
There is one person who has almost as big an interest in the sale of your business as you do – and that is the Tax Man.
The decision to sell all or part of your business, and head towards retirement or other business challenges, is not an easy one. This is due to a number of considerations, not the least, the emotional aspect of letting go of what you have worked so hard to create.
After you have worked through the emotional issues, the decision to sell, or to keep battling on for a few more years, often comes down to the cold hard reality of money – how much will I be left with to “live on” or “play with” after the dust has settled.
Unfortunately, the “market value” of your business i.e. what someone will pay for it, is in most cases not a very accurate indication of how much cash you will be left with. This is because the price paid by the buyer represents the “gross” inflow, out of which you will need to meet a number of liabilities.
The extent of liabilities you will be responsible for will to some extent depend on the deal that you are able to strike with the buyer. However, the biggest impact on your final cash balance is likely to be tax.
The extent of tax payable on the sale of your business will depend on a number of factors. These factors include:
The structure through which you carry on your business;
Whether the buyer is willing to buy your business vehicle or the underlying business assets i.e. a “share sale” or “asset sale”;
The price you originally paid to acquire the business or the assets making up the business;
The extent of “revenue” and “capital” assets in your business i.e. stock and equipment v. goodwill and property;
Your ability to access any general CGT concessions;
Your ability to access the CGT small business concessions;
Your ability to qualify for any concessional ETP or redundancy payments; and
Your ability to utilise superannuation planning strategies.
We are able to assist you to calculate tax consequences from the sale of your business. In simple terms, we can help you work out how much cash-in-hand you will be left with.
The LPO Advisor