Sale of a Business as a Going Concern: Legal Essentials in Australia

Thinking about buying or selling a business in Australia? You’ve probably come across the phrase “sale of a business as a going concern”. If the plan is for the business to keep operating under new ownership, getting this right can save tax, reduce risk and make handover much smoother.

In this guide, we’ll unpack what “sold as a going concern” means, the GST rules that apply, the key steps in the process, and the documents and consents you’ll need. We’ll also flag the main risks so you can plan a clean transition and protect your position on both sides of the deal.

This is general information only - going concern and GST treatment can be complex and highly fact‑specific. It’s a good idea to get tailored tax and legal advice early.

What Does “Sold as a Going Concern” Mean?

A sale of a business as a going concern is when the seller transfers everything necessary for the buyer to continue operating the business from completion, with no break in trade.

In practice, this usually involves the transfer of core assets, key contracts, premises rights (or a lease assignment), business records and systems, and often a handover of employees. The seller also keeps carrying on the business right up to settlement so the business remains “live” through the transition.

Why it matters: if the sale qualifies as a supply of a going concern under Australia’s GST law, the price can be treated as GST‑free. That’s a major cash flow benefit and is commonly factored into pricing and negotiations. It also encourages a seamless transition for customers and staff.

When Is a Sale GST‑Free as a Going Concern?

Under Australia’s GST rules, a sale can be GST‑free as a supply of a going concern if specific conditions are met on the day of supply (usually settlement). In plain English, you should ensure all of the following are covered:

• All things necessary are supplied: The seller supplies everything needed for the buyer to continue the enterprise - not just selected assets. Think premises rights, plant and equipment, IP, key contracts, stock, records, licences and access to systems, as relevant for that business.
• Business carried on until completion: The seller continues operating the business right up to settlement (the “day of supply”). Trading shouldn’t stop pending completion.
• Written agreement: The parties agree in writing that the supply is of a going concern and set out the GST treatment in the sale contract.
• Buyer’s GST registration: The buyer is registered, or required to be registered, for GST at the time of the supply.

Two practical tips:

• Be precise in the contract: Include clear GST clauses, identify all included assets and rights, and record the parties’ agreement that the supply is a going concern.
• Match legal terms to reality: If something essential (for example, the lease, a key licence or a critical customer contract) isn’t transferred at completion, you can jeopardise GST‑free status.

If the conditions aren’t met, the sale price may be subject to 10% GST. That can be an expensive surprise, so aligning the deal terms and the handover steps with the GST rules is essential.

Step‑By‑Step: How a Going Concern Sale Works

Every deal is different, but most going concern sales follow a similar flow. Here’s a practical roadmap from heads of terms to post‑completion:

1) Early Planning and Scoping

Both parties should define what’s in the deal. Agree upfront on the assets and rights that will transfer, what stays with the seller, and any carve‑outs. This helps avoid gaps that could threaten going concern status or value.

If you’re weighing up different deal structures, it’s worth understanding the difference between an asset sale vs a share sale - it affects what transfers, how liabilities are handled and how the price is structured.

2) Due Diligence

Buyers should test whether the business can genuinely continue on day one. Focus on:

• Legal rights: Is there a transferable lease or licence to occupy? Can critical contracts be assigned? Are there change‑of‑control or consent triggers?
• People and payroll: Who is transferring? Are award/enterprise agreement obligations, leave balances and super up to date? What onboarding steps will be needed?
• Financial and tax: Cash flow, liabilities, stock and work‑in‑progress, GST position and any tax exposures.
• IP and data: Ownership and transferability of trade marks, domains, content, software, customer databases and other intangible assets.

Vendors can prepare by assembling an asset register, contracts list, licences, and HR information, and resolving any obvious consent issues before going to market.

3) Drafting and Negotiating the Sale Agreement

The contract is where the parties lock in the deal mechanics and protect themselves from surprises. A well‑crafted Business Sale Agreement should cover:

• Inclusions and exclusions: A detailed schedule of assets, IP, contracts, stock and records to be transferred.
• GST and price: GST treatment as a going concern, price allocation (if needed) and any adjustments for stock or leave.
• Conditions precedent: Landlord consent, regulatory approvals, key supplier/customer consents, finance approvals.
• Employee arrangements: Offers to transferring employees, recognition of service, treatment of accrued entitlements and any redundancies for staff not moving across.
• Warranties and indemnities: Business warranties, title to assets, no undisclosed liabilities, and tax warranties including GST registration where relevant.
• Handover and completion deliverables: Keys, logins, IP assignments, assignment deeds and other required documents.

If any part of the business will be paid over time, the parties sometimes secure the balance with a General Security Agreement or structure payments under a Vendor Finance Agreement.

4) Consents, Assignments and Approvals

Most going concern sales hinge on third‑party approvals. Common items include:

• Lease assignment: Landlord consent is often needed. Plan for timing, information requests and potential bank guarantees or personal guarantees. Where a transfer is required, parties usually sign a Deed of Assignment of Lease.
• Contract consents: Major supplier and customer agreements may require consent to assignment or have change‑of‑control clauses in a share sale.
• Licences and permits: Industry‑specific approvals (for example, food, liquor, childcare or health) may need to be transferred or reissued.

5) Completion and Handover

At settlement, everything needed to keep operating should change hands. Typical items include:

• Signed assignments of contracts, IP, and the lease (or new premises agreement).
• Access credentials for software, point‑of‑sale, website, emails and bank merchant facilities.
• Transfer of business names, domains and registered trade marks (or filings lodged to transfer them).
• Updated insurance effective from completion and risk passing to the buyer.

Immediately post‑completion, parties action any final filings and registrations, update public‑facing details and complete payroll/ATO updates as required.

What Legal Documents Do You Need?

Your exact document suite depends on the size and nature of the business. For most going concern sales, expect some combination of the following:

• Business Sale Agreement: The core contract setting out the deal terms, price, GST treatment, assets/rights to be transferred, conditions, warranties and completion steps. If you need support with drafting or reviewing, our Business Sale Lawyers can help structure a clean, compliant transaction.
• Lease Transfer Documents: Where the premises is critical, a landlord consent and a Deed of Assignment of Lease are typically required to preserve occupancy.
• Employment Documentation: Letters of offer for transferring employees and an Employment Contract template for new hires, plus any necessary workplace policies.
• Intellectual Property Assignments: Assignments for trade marks, logos, content, domain names and software. Where appropriate, consider a filing to register your trade mark (or transfer ownership of an existing registration).
• Customer and Supplier Assignments: Assignment deeds and consent letters for key agreements, or new contracts if assignment isn’t permitted.
• Privacy and Data Documentation: If customer data is transferring, ensure you have the right permissions and update your Privacy Policy so it accurately explains how personal information will be handled under the new owner.
• Security and Finance Documents: A General Security Agreement or retention mechanisms if any price is deferred, and a Vendor Finance Agreement if the seller is funding part of the purchase price.

Keep a clear inventory of plant and equipment, IT, stock and intangible assets to avoid disputes about what is or isn’t included.

Key Risks, Consents and Practical Tips

Even experienced buyers and sellers can miss details that create headaches later. Here are the big issues to keep front of mind, plus practical ways to manage them.

1) GST Pitfalls

Risk: The deal doesn’t satisfy the going concern requirements (for example, an essential asset or right isn’t transferred, or the buyer isn’t GST‑registered on the day of supply), resulting in an unexpected 10% GST bill.

What to do: Build the GST position into the drafting. Identify “all things necessary” in the schedules, include a written agreement that the supply is a going concern, and require the buyer to be GST‑registered (or required to be) at completion. Align the practical handover so trading continues seamlessly.

2) Lease and Location Risk

Risk: Without landlord consent or a valid new occupancy right, the buyer can’t legally operate from the premises post‑completion.

What to do: Make lease assignment a condition precedent. Use a clear Deed of Assignment of Lease, plan time for landlord enquiries (financials, references) and expect security requests (bank guarantees or personal guarantees).

3) Third‑Party Contract Consents

Risk: A key supplier or customer contract can’t be assigned, or a change‑of‑control clause triggers termination rights in a share deal.

What to do: Audit contracts early and approach counterparties with an assignment or novation request. Build “must‑have” consents into the conditions precedent so you’re not forced to complete without them.

4) Employees and Entitlements

Risk: Non‑compliant staff transfers, overlooked leave balances or misapplied awards create Fair Work issues and unexpected costs.

What to do: Decide which employees will receive offers, recognise prior service where required, and factor accrued entitlements and payroll obligations into the completion adjustments. Put appropriate Employment Contracts in place from day one.

5) IP Ownership and Brand Continuity

Risk: The brand, domain or software you thought you were buying isn’t properly owned by the seller or can’t be transferred.

What to do: Confirm ownership, obtain signed IP assignments at completion and update the registries. If the brand matters, consider filing to register the trade mark (or transfer an existing registration) to lock in protection.

6) Data, Privacy and Access

Risk: Customer data can’t be lawfully transferred, or the buyer is left without access to critical systems and records.

What to do: Check the legal basis to transfer personal information, update your Privacy Policy and secure practical access (logins, admin rights, passwords) as explicit completion deliverables.

7) Securities and Encumbrances

Risk: Assets are subject to undisclosed securities or finance agreements that remain after settlement.

What to do: Require releases of security interests at or before completion and consider searches of the Personal Property Securities Register. Where the seller is providing finance, secure the deferred price with a General Security Agreement.

8) Who Is Liable for Past Customers?

Risk: Confusion about who handles pre‑completion claims or warranty obligations for past sales.

What to do: Be precise in the contract. Allocate responsibility for pre‑ and post‑completion liabilities, set notice processes and consider caps/baskets for claims. The Australian Consumer Law (ACL) will continue to apply to your own supplies after completion; liability for past supplies depends on how the deal is structured and what the contract says.

Is a Going Concern Sale Right for You?

A going concern sale makes sense when there’s a real, operating business with customers, systems and staff - and both parties want continuity. If you’re closing down or only selling certain assets, a standard asset sale (with GST where applicable) may be more suitable. In some cases, a share sale may better preserve contracts and licences; in others, an asset sale is cleaner. Understanding the trade‑offs in a share sale vs asset sale will help you choose the structure that suits your goals and risk profile.

Key Takeaways

• A sale as a going concern means the buyer receives everything needed to keep the business operating from completion, with no break in trade.
• If the statutory conditions are met - including supplying all things necessary, carrying on the enterprise until settlement, a written agreement, and the buyer being GST‑registered (or required to be) - the price can be GST‑free.
• Plan the process: scope the inclusions, run thorough due diligence, secure third‑party consents, and line up practical handover items like logins, IP assignments and lease transfers.
• A robust Business Sale Agreement and supporting documents (such as a Deed of Assignment of Lease, Employment Contracts, IP assignments and an updated Privacy Policy) help protect both sides and support GST treatment.
• Watch for common risks: missing consents, GST missteps, employee entitlements, IP ownership gaps, and data transfer issues - each can disrupt continuity and create unexpected costs.
• Choose a deal structure that fits: a going concern sale can be via asset or share sale; each option has different implications for liabilities, consents and price.

If you’d like a consultation on the sale or purchase of a business as a going concern in Australia, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat. We’re here to help you every step of the way.