Sale of a Going Concern in Australia: What You Need to Know

Selling or buying a business as a “going concern” can be a smart way to transfer an operating venture without disruption - and, if done correctly, it may also be GST-free.

Whether you’re exiting a business, expanding by acquisition, or restructuring, understanding how a sale of a going concern works will help you price the deal, manage risk and avoid tax surprises.

In this guide, we unpack what “going concern” means for Australian small businesses, when a sale can be GST-free, and how to structure your transaction with the right documents and due diligence so settlement goes smoothly.

What Is A Sale Of A Going Concern?

A “going concern” sale generally means you’re selling a business that’s operating and will keep operating under the buyer after settlement. The idea is that the buyer steps into your shoes and can carry on trading from day one.

Practically, this usually involves transferring all the assets and rights that are necessary to run the business, such as premises rights, plant and equipment, stock, intellectual property, contracts, licences, and business records. Staff may also transfer, depending on the deal structure.

For tax purposes, the Goods and Services Tax (GST) legislation uses “supply of a going concern” with specific conditions. If those conditions are met and the parties agree in writing, the sale can be treated as GST-free. We cover this in more detail below.

When Is It GST-Free In Australia?

Under Australia’s GST rules, a sale of a going concern can be GST-free if all of the following key conditions are met:

• The seller supplies all of the things necessary for the continued operation of the business (not just a few assets).
• The business is carried on until the day of supply (i.e., you keep operating right up to settlement).
• The buyer is registered (or required to be registered) for GST at the time of supply.
• Both parties agree in writing that the supply is of a going concern.

In practice, you’ll document this in your contract and ensure your settlement timeline and handover obligations match the “continued operation” requirement. If any condition isn’t met, GST may be payable on the purchase price, which can materially shift the deal economics.

Because the “all things necessary” test is fact-specific, it’s important to identify what assets, rights and arrangements must transfer for the business to function without interruption. For example, if the premises lease or a critical licence can’t be transferred or replicated, you may not meet the test.

Asset Sale Vs Share Sale: Which Path Fits Your Deal?

There are two common ways to buy or sell a business:

• Asset sale: The buyer acquires the business assets (and sometimes takes on specified liabilities) from the seller entity. This is the most common pathway for small businesses.
• Share sale: The buyer purchases shares in the company that operates the business. The company continues to own all assets and liabilities, but control changes hands.

Each route has different tax and legal implications. For GST purposes, the going concern exemption typically applies to asset sales where the operating business is being transferred. In a share sale, there’s no GST on the purchase of shares, so the going concern exemption is not usually needed for the share transfer itself.

If you’re weighing up deal structures, it can help to compare a Share Sale vs Asset Sale based on risk, licences, premises, employees, and tax outcomes.

How To Structure And Complete The Sale

A successful going concern sale is all about planning and clean execution. Here’s a practical roadmap you can adapt to your situation.

1) Map The Business And Decide The Deal Scope

• List the assets, rights and approvals that are “necessary” to operate (e.g., lease, plant and equipment, IP, key supplier and customer contracts, licences, business name, domain names, social accounts, data).
• Decide what is in or out of scope (for example, are you excluding certain debts, vehicles or personal items?).
• Confirm whether employees will transfer and on what terms.

2) Conduct Buyer Or Seller Due Diligence

Both sides benefit from thorough checks before signing. Buyers want to confirm what they’re getting; sellers want to surface and resolve issues early. This often includes financial, legal and operational reviews.

If you need a structured legal review, consider formal legal due diligence focused on contracts, licences, IP, employees, lease terms, and compliance risks.

3) Agree Heads Of Terms And Price Mechanics

• Confirm whether the sale is intended to be treated as a going concern (GST-free) and capture that in the contract.
• Set the purchase price and any adjustments (for stock, work in progress, prepaid amounts, deposits, employee entitlements).
• Clarify what happens with deposits and how the price is paid (e.g., at settlement, by instalments, or vendor finance).

4) Prepare A Robust Contract

The contract should precisely describe the assets, liabilities, conditions and obligations on both parties - including the going concern statement and GST position. For asset deals, that’s usually a tailored Business Sale Agreement with schedules listing the assets and key details.

Make sure the agreement addresses assignments and novations of third-party contracts and the premises lease, transfer of IP, handover of data and records, employee transfer mechanics, restraints of trade, and post-settlement support.

5) Line Up Consents, Assignments And Approvals

• Premises: If the business occupies leased premises, obtain the landlord’s consent and complete any Deed of Assignment of Lease before or at settlement.
• Contracts: Identify any contracts that require consent to assign or rights that need novation to the buyer.
• Licences/Permits: Confirm which licences can transfer and which the buyer must obtain in their own name prior to settlement.

6) Settle Cleanly With A Completion Checklist

Settle with a clear schedule of deliverables and funds flow: title and risk in assets, release of security interests, delivery of records and keys, and completion of assignments.

To avoid last-minute scrambling, work from a practical completion checklist that aligns with your contract and captures all required documents and steps.

7) Post-Settlement Handover And Support

If the buyer needs transitional assistance (like training, supplier introductions or access to systems), capture it in the contract with clear timeframes and boundaries. This helps the buyer maintain continuity and supports the going concern position.

What Legal Documents Will You Need?

Your exact list will depend on the business and the deal, but most going concern transactions involve several core documents.

• Business Sale Agreement: Sets out the terms of the sale, price and adjustments, the going concern statement, warranties, restraints, and completion mechanics. Tailoring a Business Sale Agreement to your transaction is critical.
• Assignment/Novation Deeds: Used to transfer key supplier, customer and service contracts to the buyer where permitted.
• Lease Assignment: If premises are included, a landlord consent and Deed of Assignment of Lease are usually required before completion.
• IP Assignment: Transfers trade marks, domain names, content, software and other intellectual property used in the business.
• Release Of Security Interests: Ensure business assets are free of registered interests on the PPSR so title passes cleanly to the buyer.
• Employee Transfer Letters: If staff are moving across, issue offers and confirm recognition of service and entitlements (and ensure onboarding documents and policies are ready).
• Privacy And Data Documents: If you’re transferring customer databases, ensure you have a compliant Privacy Policy and lawful basis for data transfer and ongoing use by the buyer.

If the deal is structured as a share sale, you’ll use a Share Sale Agreement instead, and many assignments won’t be necessary (as the company remains the counterparty). The trade-offs differ, so compare a Share Sale vs Asset Sale early in your planning.

Common Legal Issues And Risk Areas

Going concern deals are manageable with the right preparation. Here are the issues we see most often, and how to approach them.

GST And The “All Things Necessary” Test

If a critical element (like premises rights or a non-transferrable licence) can’t be assigned or replicated, you may fail the going concern test. Consider alternatives such as a short transitional sub-licence, re-licensing the buyer before completion, or carefully scoping the deal so the business can still operate.

Premises And Landlord Timing

Landlord consent processes can take longer than expected. Start early, supply complete financials and references, and factor this into your conditions precedent so the lease is secured before settlement.

Security Interests And Clear Title

It’s common for assets to be subject to finance or supplier charges registered on the PPSR. Identify all registrations early, arrange pay-outs and obtain releases so the buyer receives clear title at completion.

Employees And Entitlements

For asset sales, the buyer typically chooses which employees to offer roles to. You’ll need to agree who bears accrued leave and long service leave costs via price adjustments. Make sure offers are issued in time for a smooth transition and that workplace policies and onboarding forms are ready for day one. If customer-facing staff are key to continuity, build this into your completion plan.

Customer And Supplier Contracts

Change-of-control and assignment clauses can trip up a deal. Review key agreements for consent requirements and lock in approvals early. If critical contracts cannot be assigned, consider a novation or having the seller perform under the contract for a short transition period where lawful.

Data And Privacy

Personal information can’t be handed over casually. Confirm that your Privacy Policy and customer notices allow the transfer in the context of a business sale, and that the buyer will continue to comply with Australian privacy laws once they take control of the database and systems.

Price Adjustments And Handovers

Be explicit about stock valuation methods, work-in-progress calculations, prepayments, deposits and gift vouchers, and how employee entitlements will be adjusted at settlement. Clear formulas and a practical stocktake plan prevent disputes.

Warranties, Indemnities And Restraints

Warranties and indemnities allocate risk for past issues. Sellers should ensure statements about the business are accurate and limited to what they know; buyers should secure protections on financials, compliance, IP ownership and key contracts. A reasonable restraint of trade helps protect the goodwill you’re paying for.

Settlement Logistics

Good settlement packs list deliverables (keys, codes, devices, records), confirm funds flow, and coordinate any simultaneous pay-outs of finance. Using a detailed completion checklist keeps everyone aligned on the day.

Key Takeaways

• A sale of a going concern transfers an operating business so the buyer can keep trading without interruption, and it can be GST-free if strict conditions are met.
• Plan the scope carefully so you transfer all things necessary to run the business - premises rights, contracts, licences, IP, records and, where relevant, staff.
• Choose a structure that suits your goals: asset sales commonly use the GST going concern exemption, while share sales avoid GST on shares but carry different risks.
• Lock in consents and assignments early (lease, key contracts, licences) and clear the PPSR so the buyer receives clean title at completion.
• Use a tailored Business Sale Agreement, document price adjustments clearly, and coordinate settlement with a practical completion checklist.
• Professional legal due diligence and early advice reduce risk and help preserve the GST-free position.

If you’d like a consultation on structuring or documenting a sale of a going concern, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.