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Business Sales & Purchases
When it comes time to sell your business, we always focus on providing clients with the best possible net outcome. To achieve this, you need your acting solicitors to be tax specialists, like Cleary Hoare. As a business owner, you have worked too hard to miss out on the generous tax concessions available.
For the majority of small to medium size business owners, the value of your business (including business real estate) is your biggest asset and, more than likely, your retirement fund. Therefore it is critical that you receive the maximum available net proceeds from your sale transaction. Many Australians miss this once in a life time chance through poor planning, inadequate advice and the holding of assets in inappropriate structures.
When it comes to business sales, the government has been very generous with the available Capital Gains Tax (CGT) concessions. Just because you consider yourself a small business, this does not mean you have automatic access to the concessions. The government has placed strict rules and regulations covering a business’ eligibility. If the correct planning is in place, a husband and wife team has the ability to receive up to $4 million tax free.
Very broadly speaking, the core hurdle regarding business sales are:
The ultimate CGT position for a trust or individual would be:
If you are planning to sell your business or a business asset, you do not need to be looking at a $4 million capital gain for effective planning to make a huge difference to your net result. Here is an example: A client approached Cleary Hoare with a plan to sell their business in approximately two years' time. After a meticulous analysis of the balance sheet and structure, it was apparent a major asset would not meet the “active asset” test due to the nature of the structure that held the asset. Due to the fact that the client had time on their side, we were able to implement a solution that ensured that the asset was an active asset well before the actual sale.
Below is a comparison study howing the change in the client's (take home) result:
Unfortunately, results like this are not always achieved. There are two very common oversights that many private business owners make when they sell their business and attempt to access the available CGT Concessions. Firstly, they leave it too late to inform their advisors about the impending business sale, and secondly, their advisors do not have a thorough understanding of the legislation and the possible restructuring opportunities available to maximise these generous concessions.
Business sales planning is very important. Some very surprising and excellent results can be achieved by proper and thorough analysis and “sale year planning”. All of the capital gains will, in many cases, be tax free.