It Depends – Is there duty payable on the sale of my business?

It Depends – Is there duty payable on the sale of my business?

13 October 2021 Topics: Duty, Professional advisers, Tax and revenue

In this edition of ‘It depends’, associate Keeghan Silcock talks about whether there is duty payable on the sale of your business.

Video transcript

Hi, and welcome to another edition of It Depends. Today, I’ll be talking about whether there is duty payable on the sale of your business.

How is the business sale structured?

Well, it depends. One of the first considerations that you look at when seeing whether there could be duty payable on the sale of a business is how is that sale structured? If the business sale is structured as a sale of shares or other equity interests in the current owner of the business, you may find that there’s no duty payable. And this is because in many states and territories around Australia, duty has been abolished on a transfer of shares. That is, however, subject to a number of exceptions. One of the main ones is where that company, which is the current owner of the business, is considered a land holder or land rich because there are provisions which can cause that transfer of shares to be subject to duty in those circumstances. Also, in Queensland, we have to be really careful if the current owner of the business is a unit trust as it is duty payable on the transfer of units in Queensland.

What are the business assets and where are they located?

If the transfer of the sale of the business is structured as a transfer of business assets from one entity to the other, rather than a transfer of shares in the current owner of the business, then the duty position will depend on where the assets of that business are located. Many people think that there is no longer any duty payable on a transfer of business assets, and that’s because duty has been abolished in all states and territories on a transfer of business assets other than Queensland, Western Australia and the Northern Territory. So, you do have to be careful when you have a sale of business assets in Queensland, Western Australia and Northern Territory. You could be looking at having duty payable on that sale. Again, there are some exemptions and considerations that can apply so that you either reduce the duty payable or there is no duty payable at all. But it’s really important that you get advice at the time of that business sale.

If you have a client who is looking to do a transfer of business assets, either as an internal restructure or a sale to a new owner, it’s important that they get advice from the outset, not just on the tax consequences of that sale, but also the duty consequences. Please feel free to contact a member of our team if we can assist with this.

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