The Going Concern Exemption: Business Advice that Could Save You Money
If you’re selling your business, you probably want to hear any advice related to keeping costs down. That should include not paying the government more than you legally have to for the transaction. The good news is that there is an exemption that could help you cut back on costs by paying no goods and services tax.
What is a Going Concern?
A going concern is a concept created by the Australian Tax Office (ATO). If a business will be able to continue operating for a length of time after the sale and will, in that time, continue to carry out its obligations, commitments, and objectives, it may be labeled a “going concern” by the ATO. That means that the company will not go out of business in the foreseeable future and will not have to liquidate its assets.
A Going Concern Business & GST
What is the benefit of being deemed a going concern? You will not be required to pay GST on the sale of the business. That means that the buyer won’t have to pay more to complete the sale. It will also decrease the stamp duty payable on the transaction. When approved by the ATO, a going concern sale can lower costs, making the opportunity more attractive to buyers. It’s great business advice when you want to sell fast or find a buyer who will follow through.
Business Advice You Need Before Requesting Going Concern Status
There is some risk involved when requesting going concern status. You could be denied by the ATO, which means applicable taxes will still need to be paid. To protect yourself, you should include a clause in the sale contract. This clause will state that the buyer will compensate the seller for all payable GST if the ATO denies the exemption.
If you are thinking about buying or selling a business, then you should know what the requirements are for a going concern. The current list includes:
- All resources required to continue operation are supplied by the previous owner
- The previous owner will continue to manage the company until the new owner takes over with no break in operation
- The purchaser is required to be or is registered for GST
- Full payment is made on the sale
- The seller and buyer agree in writing that the sale is a going concern
Learn More About Buying & Selling Businesses
If you’re interested in buying and selling a business or have financial questions, you need Oculus Group on your side. Our experts can provide reliable business advice that can help you lower costs. Stop by our contact page or give us a call on 07 5536 3755 to learn more.