Waiting to restructure your business before a sale can cost you significantly at settlement. This guide explains why your business structure matters to buyers and the tax office, when to act, and what to discuss with your accountant well before you go to market.
This guide is part of our Exit Readiness series with POP Business, one of Australia's leading accounting firms for SME owners preparing to sell. Emanda's Peter Gatt sat down with POP's Sid Khaira to break down the financial, structural, and strategic decisions that determine what your business is actually worth at sale. Watch the full fireside chat here.
More in this series: Cash Is King: How Cash Flow Affects Your Business Valuation in Australia | How to Plan Your Business Exit From Day One
The way your business is structured directly affects how much tax you pay when you sell it. Restructuring too close to a sale, or waiting until you're already in the process, often means missing out on concessions that require time to qualify for. Most Australian SME owners benefit from reviewing their structure at least 2 to 3 years before they intend to go to market. Speak with a specialist accountant or advisor before making any decisions.
Most Australian business owners spend years focused on growing their revenue, managing their team, and keeping customers happy. The question of how the business is structured tends to stay in the background. It was a decision made early on, often by an accountant, and it rarely comes up again.
Until you decide to sell. At that point, structure becomes one of the most important financial variables in the entire transaction. This guide explains why, what to look for, and what questions to bring to your accountant before you go anywhere near a broker.
Peter Gatt and Sid from POP Accounting discuss exactly this: why waiting to restructure is effectively a tax you pay at settlement, and what to do instead. Short: 'Why Waiting to Restructure Your Business Is a Tax': https://youtube.com/shorts/hyrLUIIDPdQ
When you sell a business in Australia, the tax treatment of the proceeds depends heavily on what you're selling and how the business is held. A sale of shares in a company is treated differently to a sale of business assets. A trust structure has different implications again. And eligibility for some of the most valuable tax concessions available to small business owners depends not just on the structure, but on how long that structure has been in place.
This is where timing becomes critical. Many of the concessions available to Australian SME owners when they sell, including the small business capital gains tax concessions, have eligibility criteria that include minimum holding periods and active asset tests. If you restructure into a more favourable position shortly before selling, you may not have held the asset for long enough to qualify.
Australia's tax system includes a set of concessions specifically designed to reduce the capital gains tax burden on small business owners when they sell. These concessions can be substantial, and for many owners they represent one of the most significant financial outcomes of their entire working life.
Eligibility depends on a number of factors including the size of the business, the nature of the assets being sold, and the owner's own circumstances. The critical point for exit planning is that some concessions require assets to have been held for a minimum period and certain conditions to have been continuously met. A restructure that happens too close to the sale date may reset those clocks or break the eligibility conditions entirely.
Some business owners are still operating in their own name or through an arrangement that made sense early on but creates complications at sale. Buyers face different risks purchasing from an individual versus a company or structured entity, and this affects how the sale is structured and what they're willing to pay.
When personal and business assets have been commingled over time, this creates complexity for both buyers and the tax treatment of the sale. Untangling this close to a sale is time-consuming and can delay or complicate the process significantly.
Trust structures are common in Australian SMEs and can be highly effective for tax purposes. However, they can create complications at sale if the trust has multiple beneficiaries or if the trust deed has not been reviewed and updated to reflect the current situation.
Some businesses operate through a holding and operating company structure. This can be effective during the life of the business, but the implications for a sale, whether a buyer wants shares or assets, and how each is taxed, need to be considered as part of exit planning rather than at the point of sale.
The most effective exit planning engagements start with an accountant who treats the eventual sale as a known milestone. At the 2 to 3 year mark, the conversation should include:
This is not the same as a standard annual compliance review. It requires an accountant who understands business sales, or who works alongside advisors who do.
The most common version of this problem: a business owner decides to sell, engages a broker, and then discovers the structure is not optimal. By then, the options are limited. A restructure done at this point may not achieve its intended purpose because the holding periods required for key concessions haven't been met. It may also create stamp duty obligations, trigger CGT events, or complicate due diligence for the buyer.
The owner proceeds with a less-than-ideal structure and pays more tax than they would have with earlier planning. This is one of the most common and most preventable outcomes in Australian SME exits.
Ideally 2 to 3 years before you plan to go to market. Restructuring too close to a sale can trigger tax events or fail to qualify for concessions that require a minimum holding period.
Yes, significantly. The tax outcome varies depending on whether you're a sole trader, partnership, trust, or company, and whether the business qualifies for small business CGT concessions. The structure also affects how a buyer can purchase the business.
A set of tax concessions that can significantly reduce or eliminate capital gains tax on the sale of a business asset. Eligibility depends on turnover, asset value, holding period, and the nature of the assets. Speak with a registered tax advisor.
Restructuring during a sale process is generally too late to capture the most valuable tax concessions and can complicate due diligence for buyers. It is almost always better to restructure well in advance.
An accountant preparing a business for sale will typically review the current structure, identify restructuring opportunities, normalise the financials, advise on timing, and help the owner understand the likely tax outcome before they engage a broker.
This article contains general information only. It does not constitute financial, legal, or professional advice and should not be relied upon as such. You should seek independent professional advice tailored to your circumstances before making any decisions about restructuring your business, the timing of a business sale, or your tax obligations.
Ready to understand where your business stands? The Emanda Book Score benchmarks your business across 500+ industries and shows you exactly where you sit in your industry's valuation range, including the structural and financial factors that are moving your number up or down. Get your Book Score at emanda.app.
Practical guides, interviews, and insights to help you prepare for the biggest sale of your life.
The best business exits aren't planned when you're ready to sell. They're built from the day you start. This guide explains why exit planning is a day-one decision, what it looks like in practice, and how Australian SME owners can start preparing now, regardless of when they intend to sell.
Explore →Cash flow is the single biggest factor buyers look at when valuing an Australian SME. This guide explains why cash is king in a business sale, how buyers assess your cash flow, and what you can do now to improve yours before you go to market.
Explore →Waiting to restructure your business before a sale can cost you significantly at settlement. This guide explains why your business structure matters to buyers and the tax office, when to act, and what to discuss with your accountant well before you go to market.
Explore →Join business owners and advisers who get our latest thinking on health, valuation, and M&A strategy.
Your business sale, planned from day one. Guiding business owners and their advisers through the full sale journey.