Selling a company may be straightforward, but the tax result often hinges on how the deal is structured. For business owners in Perth, the distinction between selling shares and selling business assets can have an impact on capital gains tax, GST and Western Australian duty. Early advice can avoid surprises after contracts are signed.

Start with the structure of the deal

In a share sale, owners typically sell their shares. In an asset sale, the company sells certain assets, including goodwill, intellectual property or land. Tax consequences can vary greatly. You should get advice from the best tax lawyer in Perth for your circumstances before negotiations get tough, to identify what taxes might arise from each structure and how the proposed terms impact the seller.

"Check capital gains tax"

Selling shares or business assets may result in capital gains tax. Some owners might be eligible for CGT concessions which include the 15-year exemption, the 50% active asset reduction, the retirement exemption or the small business rollover. Eligibility is technical and dependent on such conditions as business size, asset use and ownership interests.

GST Review

Check GST before the purchase price is set. A sale of a business may satisfy the legal requirements to be a GST-free supply of a going concern. If that treatment is not applicable, the GST may have an effect on pricing, cash flow and contract drafting. The agreement should specify how GST is treated.

WA transfer duty is not to be forgotten

Transfer duty is imposed by Western Australia on certain transactions involving real estate and specified business assets. “Goodwill, business identity, licences, intellectual property and some contractual rights are among WA business assets that can be dutiable,” Revenue WA says. Landholder duty issues can also arise from share transactions where the company has sufficient WA land interests.

Review company history of taxes

Buyers usually examine unresolved tax risks during due diligence. Outstanding income tax, GST, payroll tax, fringe benefits tax or ATO disputes can impact negotiations and warranties. A Tax law firm can review old deals, find risks, and deal with problems before they become late bargaining points.

Think about the money from the sale

The tax result doesn’t end at settlement. If companies, trusts or superannuation arrangements are involved, owners should consider how the proceeds of sale will be received, retained or distributed. Timing of payments, earn-outs and post-sale obligations can also change tax consequences.

Prepare before you sign

Tax planning works best prior to transaction documents locking in the commercial structure. Perth business owners need to get early legal tax and accounting advice, check available concessions, look at duty and GST and ensure the contract reflects the intended treatment. A pre-sale review can help to make settlement cleaner and reduce the possibility of an avoidable tax dispute.