This primer is general information about how buying a business usually works in Australia. It has not yet been reviewed by a qualified professional in Australia. It is not legal, tax or financial advice, the rules change, and many of them, including stamp duty and licensing, differ between states and territories. Take advice from an Australian lawyer and accountant on your own deal before you commit.
How deals are usually structured
Australian acquisitions are either a business sale or a share sale.
In a business sale (an asset purchase), you buy the business and its assets from whoever runs it: a sole trader, a partnership, a company or the trustee of a trust. The sale agreement lists what is included, such as equipment, stock, customer contracts, intellectual property, domain names and goodwill. Leases, contracts and licences usually need to be assigned or reissued, and you trade under your own Australian Business Number (ABN), because an ABN cannot be transferred to a new owner. You may also need to transfer the business name registration.
In a share sale, you buy the shares of the company that owns the business. The company keeps its ABN, contracts, licences, employees and liabilities, so due diligence and the warranties and indemnities in the share sale agreement carry more weight. Check customer and supplier contracts for clauses that let the other party end the contract on a change of control.
A typical process runs from a letter of intent or heads of agreement, through due diligence, to a signed sale agreement and completion. Before you pay for assets, search the Personal Property Securities Register (PPSR) against the seller. It shows whether equipment, stock, vehicles or intellectual property are security for someone else's debt. It does not cover land.
In an asset sale you buy selected assets of a business; in a share sale (a stock sale in the US) you buy the company itself, with its full history. The choice shapes risk, tax and what needs consent.
Goodwill is the part of a purchase price above the value of a business's identifiable assets, less its liabilities. It reflects things like reputation, customer relationships and trained staff.
Due diligence is the investigation a buyer carries out before committing to a purchase, testing the finances, contracts, legal position and operations against what the seller has described.
Financing
Buyers usually combine their own money with debt and some deferred payment to the seller:
- business loans from banks and non-bank lenders, usually secured and assessed on the business's ability to meet repayments and on your experience
- equipment and vehicle finance for specific assets
- vendor finance (seller finance), where the seller is paid part of the price over time
- earn-outs, where part of the price depends on future results
Lenders will want to see the business's financial statements and tax returns, the sale agreement and your plan for running the business. If you are a foreign buyer, foreign investment approval may be a condition of both the loan and the sale. Financing an acquisition explains how the layers fit together and how lenders test affordability.
Seller finance is when the seller lends the buyer part of the purchase price, to be repaid with interest after completion. It is also called vendor finance or a seller note.
An earn-out is part of the purchase price paid only if the business meets agreed targets after the sale. It can bridge a gap between the seller's price and the buyer's view of the evidence.
Employees
In a share sale the employer does not change, so employment continues on existing terms.
In a business sale, the seller's employment of staff ends and the buyer offers jobs to those it wants to keep. The Fair Work Act 2009 treats this as a transfer of business when an employee starts with the new employer within three months of leaving the old one, does the same or substantially the same work, and there is a connection between the two employers, such as the buyer acquiring the seller's business assets.
When there is a transfer of business:
- an enterprise agreement that covered the transferring employees generally binds the new employer for those employees
- the new employer must recognise the employee's service with the old employer for most entitlements
- a new employer that is not an associated entity of the seller can choose not to recognise prior service for some entitlements, such as annual leave and redundancy pay, in which case the seller generally has to pay out or meet those entitlements
Long service leave mostly comes from state and territory laws, which can treat prior service differently. Agree in the sale agreement how accrued leave and other entitlements are dealt with in the price. Check too that the seller has paid wages and superannuation correctly, and see contractors who are employees in practice.
Tax and regulatory touchpoints
- GST. The sale of a business can be GST-free as the sale of a going concern. The conditions include that the sale is for payment, the buyer is registered or required to be registered for GST, the seller supplies everything needed to carry on the business and carries it on until the day of sale, and both parties agree in writing that it is the sale of a going concern.
- Stamp duty. Duty is set by each state and territory, and the rules differ. In New South Wales, for example, duty on a business purchase applies to land and interests in land, such as a lease, but not to goodwill, while Queensland can charge duty on business assets including goodwill and intellectual property. Buying shares in a company that holds land above a threshold can also attract landholder duty. Check the rules in every state and territory where the business has assets.
- Clearance certificates. If the sale includes Australian real property, an Australian resident seller should give the buyer a clearance certificate from the Australian Taxation Office by settlement. Without one, the buyer must withhold 15% of the purchase price for the property and pay it to the ATO.
- Merger control. From 1 January 2026, acquisitions that meet notification thresholds must be notified to the Australian Competition and Consumer Commission and cannot proceed without approval or a waiver. The thresholds are aimed at larger deals, for example where the combined businesses have Australian revenue of at least A$200 million and the target has at least A$50 million, or where an acquirer with Australian revenue of at least A$500 million buys a business with Australian revenue of at least A$10 million.
- Foreign investment. Under the Foreign Acquisitions and Takeovers Act 1975, foreign persons must notify the Treasurer and get approval before certain acquisitions. Monetary thresholds depend on the type of investor and are indexed each year on 1 January, and some investments, such as those by foreign government investors or in national security businesses, can need approval whatever their value.
- Licences and registrations. Liquor, food, trade, health and transport licences are issued by state and territory governments or local councils. Transfers can take a long time, so plan them early. You will also need your own tax registrations and payroll arrangements from completion.
Advisers you are likely to need
- A lawyer experienced in business sales, for the sale agreement, lease assignment, licence transfers and legal due diligence, with employment advice on the transfer of staff.
- An accountant or tax adviser, for financial due diligence, structure (company, trust or other), GST, stamp duty and capital gains tax.
- A lender or finance broker experienced in acquisitions.
- A business broker, who usually acts for the seller.
- A foreign investment adviser if you are, or are backed by, a foreign person.
- An insurance broker, and specialists such as a licensing consultant or equipment valuer where the business needs them.
A business broker markets businesses for sale and manages the process on the seller's behalf. The broker is usually paid by the seller, mostly when a deal completes.
Before you sign
- Decide between a business sale and a share sale with advice.
- Search the PPSR and the company register for the seller and the business.
- Confirm the going concern conditions for GST and write them into the agreement.
- Get stamp duty advice for every state or territory where the business has assets.
- Check landlord consent for the lease and the timing of every licence transfer.
- Agree which employees you will employ, how prior service and accrued leave will be handled and what is adjusted in the price.
- Check whether foreign investment approval, merger notification or a clearance certificate applies.
- Work through the diligence document request list and Due diligence: what to check and in what order.
If you want a listing's figures and public records checked before you instruct advisers, see what's in a dossier.