What Does ‘Going Concern’ Mean In Australian Business Sales?

If you’re buying or selling a business in Australia, you’ll almost certainly come across the term “going concern.” It turns up in contracts, negotiations and tax planning - and it has real consequences for price, timing and cash flow.

At its core, selling a business as a going concern is about continuity. The enterprise keeps operating right up to settlement and the buyer receives everything necessary to carry it on from the next day. When done properly, this can unlock GST benefits and make the handover far smoother for both parties.

In this guide, we’ll break down what “going concern” means in Australian business sales, when a sale can be treated as a GST‑free going concern, what has to transfer at settlement, common pitfalls, and the key documents to have in place. If you’re navigating a deal right now, don’t worry - with the right structure and paperwork, you can protect yourself and keep your transaction on track.

What Does “Going Concern” Mean In Australia?

In plain English, a business is a going concern when it’s currently operating and expected to continue operating into the foreseeable future. In the sale context, it means you are not shutting the doors and selling off bits and pieces. Instead, you transfer a functioning enterprise to the buyer so they can step in and keep trading.

Practically, that looks like staff staying on, customers still being served, suppliers still supplying, and the systems, licences, contracts and assets needed to run the business all moving across at completion. The key is that there’s no material break in operations.

Why does the “going concern” label matter?

• It can change tax treatment (especially GST) and therefore impact cash flow at settlement.
• It supports continuity - customers and staff experience a seamless transition, reducing risk to revenue.
• It can underpin value - buyers pay for an operating enterprise with goodwill, not just standalone assets.

Because the term has a specific meaning in Australian tax and contract law, it’s important your deal is structured and documented correctly from the outset.

When Is A Sale Treated As A GST‑Free Going Concern?

Under Australian tax rules, the sale of a business can be GST‑free if it’s supplied as a going concern and the parties meet certain conditions. This is a common goal in business sale negotiations because it removes a 10% GST layer that would otherwise need to be funded at completion (and later recovered by the buyer if entitled).

Core conditions you’ll typically need to satisfy

• The supplier provides all the things necessary for the continued operation of the enterprise (not just some assets).
• The enterprise is carried on by the seller until the day of supply (there’s no pause or shutdown before settlement).
• There is a written agreement between the parties that the supply is of a going concern, and both parties are registered for GST (if registration is required for them).

When these elements line up, the sale price can be treated as GST‑free for the supply of the going concern. In turn, the buyer doesn’t have to fund GST at settlement, which can make the deal more attractive and easier to complete.

Important note: GST is a tax issue and your exact position depends on your circumstances. You should obtain specific tax advice alongside your legal advice before you lock in pricing and contract wording.

Does this only apply to the sale of a whole business?

No. A sale of part of a business can still be a going concern if that part constitutes an enterprise in its own right and the seller supplies all things necessary for that enterprise to continue. For example, if you carve out a self‑contained division (with its own systems, contracts and staff) and transfer everything needed for it to keep trading, that can meet the test. The focus is on whether the thing being sold is a functioning enterprise and whether continuity is preserved - not whether it’s the seller’s entire operation.

What Needs To Transfer In A Going Concern Sale?

Every business is different, but the central idea is the same: the buyer must receive what they need to keep trading without a break the day after settlement. In practical terms, that often includes:

• Business premises - either an assignment of the existing lease or a new lease commencing at settlement. If you’re taking over a site, a Deed of Assignment of Lease (with landlord consent) is commonly required.
• Plant, equipment and stock - the tangible assets required to deliver the product or service.
• Intellectual property - trade marks, brand names, domain names, social media handles, software, recipes, processes and other IP. These are typically transferred under an IP Assignment.
• Operational contracts - supplier agreements, distribution arrangements, key customer contracts, payment gateways, and any third‑party licences needed to operate.
• Employees (where applicable) - continuity of employment for transferring staff, with accrued entitlements handled as agreed in the contract. Putting new or updated Employment Contracts in place for day‑one clarity is a good idea.
• Business records and systems - CRM databases, accounting files, SOPs, manuals, passwords, access credentials and other operational know‑how.

Your sale agreement should set out these components clearly, identify any consents required, and create a plan to manage any items that can’t be assigned until after completion (for example, a contract that only allows assignment with customer consent). Where something cannot be transferred, you may need transitional arrangements so the enterprise can still function continuously.

How Should You Structure The Deal?

Most transactions follow one of two paths: a share sale or an asset/business sale. The right structure for a going concern depends on what you want to assume, what you want to leave behind, and how you’ll achieve continuity.

Share sale

The buyer acquires the shares in the company that operates the business. The entity stays the same - so contracts, permits and employees generally stay where they are. That can make continuity simpler, but it also means the buyer inherits the company’s history and liabilities unless the contract says otherwise.

Asset/business sale

The buyer acquires the business assets from the seller (often from a company that retains its other assets). This can be cleaner in terms of isolating liabilities, but you’ll need to transfer leases, contracts, IP, employees and licences to maintain operational continuity.

To help weigh these options, it’s worth reading about the differences in a Share Sale vs Asset Sale. Whichever structure you choose, continuity planning and careful drafting are essential if you want GST‑free going concern treatment.

Get the contract right from day one

Your sale contract should include a going concern clause, spell out exactly what is included, and deal with GST, adjustments, employee entitlements, price apportionment (if relevant) and completion mechanics. A tailored Business Sale Agreement that aligns with your chosen structure is critical to protect both parties and uphold the going concern position.

Don’t skip due diligence

From the buyer’s perspective, you need to confirm the business can keep operating on day one. That means verifying assignability of key contracts, landlord consent timing, licence transfer rules and any hidden liabilities. A structured process through a legal due diligence package helps you identify issues early and negotiate solutions into the contract.

Common Traps (And How To Avoid Them)

Going concern sales often come unstuck on details that are completely preventable. Here are the issues we see most - plus how to avoid them.

1) Not supplying “all things necessary”

If you leave out a critical asset or agreement (for example, the brand’s registered trade mark or the exclusive distribution contract that drives most revenue), you may fail the going concern test and invite GST into the deal. Make a complete inventory of what’s needed and ensure it’s covered in the sale agreement and the completion checklist.

2) Breaks in trading

Even a short pause - closing the doors before completion, cutting off supplier accounts too early, or switching off the website - can undermine the continuity requirement. Keep the enterprise running until the moment of completion and hand over access so the buyer can continue from that point without downtime.

3) Consents that take longer than expected

Landlord approval, franchisor consent, finance releases and customer assignment approvals can all take time. Build realistic timeframes into your contract and consider conditional completion, transitional services or risk‑sharing mechanisms if a consent can’t be secured by the target date.

4) Vague or missing GST wording

If your contract doesn’t clearly state the parties’ agreement about a going concern supply, or it mishandles price “plus GST” versus GST‑free language, you risk disputes and unexpected tax. Use precise GST drafting and align it with your tax advice.

5) Confidentiality and data risks during due diligence

Sharing customer lists, pricing and trade secrets is often necessary before signing. Do it under a robust Non‑Disclosure Agreement and control access to sensitive information. If personal information is involved, make sure you disclose and transfer it lawfully.

6) Assuming part‑business sales can’t be going concerns

They can - provided the part being sold is an identifiable enterprise and everything necessary to operate it is supplied. If you’re carving out a division, plan early to separate systems, contracts and staff in a way that preserves continuity.

What Documents Will You Need?

The exact suite will depend on your industry and deal structure, but most going concern transactions will involve:

• Business Sale Agreement: Sets the terms of the deal, identifies the assets and contracts being transferred, covers GST, employee entitlements, price, warranties, indemnities and completion mechanics. A customised Business Sale Agreement is the backbone of the transaction.
• Completion checklist and deliverables: A working list of everything to be handed over on the day (keys, passwords, devices, certificates, hard drives, licences). Using a structured completion checklist keeps both sides aligned.
• Lease transfer documents: For premises, a Deed of Assignment of Lease (or a new lease) with landlord consent.
• IP transfer documents: Trade mark assignments, domain and social media transfers, and an IP Assignment for copyright and other intangible assets.
• Contract assignments or new contracts: Supplier and customer agreements may require formal assignment or re‑papering under new terms.
• Employee transfer and onboarding documents: Transfer letters, statements of service and updated Employment Contracts so roles, pay and entitlements are clear from day one.
• Confidentiality documents: A pre‑signing NDA to protect sensitive information exchanged during due diligence.

Depending on your sector, you may also need licence transfer forms, franchisor consents, finance releases and ASIC forms (for share sales). Your lawyers should map these out early so timing and dependencies are managed properly.

Who prepares and negotiates the documents?

Both parties will typically engage their own advisors. Sellers usually work with their accountant for tax settings and their lawyers for structure, risk allocation and drafting. Buyers often begin with a review of financials and legal due diligence, then move to drafting and negotiation once key risks are understood. Collaboration is essential - the documents should reflect a shared plan to keep the business running continuously through completion.

Key Takeaways

• A “going concern” sale is about continuity - the buyer receives everything necessary to keep the enterprise operating without a break.
• If the conditions are met (including continuity, supplying all things necessary, written agreement and GST registration), a sale can be GST‑free as a going concern, improving cash flow at settlement.
• You can sell part of a business as a going concern if that part is an identifiable enterprise and you supply everything needed for it to continue operating.
• Plan early for consents, assignments and staff transfers so there’s no interruption in trading on completion day.
• Use a tailored contract suite - including a Business Sale Agreement, lease and IP assignments, contract assignments, Employment Contracts and an NDA - to protect both sides and support GST‑free treatment.
• Tax settings (especially GST) depend on your circumstances, so get coordinated legal and tax advice before you finalise price and drafting.

If you’d like a free, no‑obligations chat about structuring and documenting a going concern business sale, you can reach us on 1800 730 617 or team@sprintlaw.com.au - we’re here to help you complete your deal smoothly and with confidence.