#06 | Small Business Series
You have built something real. Now you want to sell it.
Before you agree to anything, you need to understand one thing clearly: how you structure the sale will determine how much money you actually keep.
Two buyers can offer you the same purchase price. One structure might put tens of thousands of extra dollars in your pocket. The other could cost you far more in tax than you expect.
This is not a minor detail. It is one of the most important decisions you will make in the entire sale process.
The deal structure — asset sale or share sale — affects your tax bill, your negotiating position, and your outcome. Understanding this before you enter talks gives you a real advantage.
Let us walk through both options clearly and simply.
What Is an Asset Sale?
In an asset sale, the buyer purchases individual items from your business. This can include:
- Equipment and machinery
- Customer lists and contracts
- Intellectual property and trademarks
- Goodwill and business name
- Stock and inventory
The buyer chooses what to take. They do not take on the legal entity itself — just the pieces inside it.
Your company still exists after the sale. But it no longer holds the assets the buyer purchased.
Think of it like selling the furniture from a house — but not the house itself.
What Is a Share Sale?
In a share sale, the buyer purchases your shares in the company. They buy the whole entity — not just the contents.
Everything transfers with the shares: contracts, employees, leases, tax history, and any liabilities that exist inside the company.
The buyer steps into your position as owner. They take control of the business exactly as it stands.
Think of it like selling the entire house — walls, furniture, and anything buried in the backyard, too.
Tax Implications: Asset Sale vs Share Sale
This is where the real difference lives. The tax treatment of each structure varies — and the gap can be significant.
Asset Sale Tax Treatment
When you sell individual assets, each one gets treated separately for tax purposes.
Depreciable assets — such as equipment — are often taxed as ordinary income when sold above their book value. This can mean a higher tax rate than you might expect.
People treat goodwill as a capital asset. If you held it for more than 12 months, you may access the 50% capital gains tax (CGT) discount.
Small business CGT concessions can also apply. Depending on your circumstances, you may be able to reduce or eliminate the capital gain entirely. This is a significant opportunity worth exploring with your tax adviser. and the ATO.
Share Sale Tax Treatment
When you sell shares, the entire gain is typically treated as a capital gain.
If you have held your shares for more than 12 months, you may access the 50% CGT discount immediately. This can substantially reduce your tax bill.
The small business CGT concessions can also apply to share sales — particularly the 15-year exemption, the 50% active asset reduction, and the retirement exemption. Each one is worth understanding in detail.
Often, a share sale results in a lower effective tax rate for the seller. This is why sellers often prefer this structure.
| Feature | Asset Sale | Share Sale |
| What transfers | Individual assets and liabilities chosen by the buyer | Entire company, including all history and obligations |
| Tax for seller | Income tax on depreciable assets; CGT on goodwill | CGT on shares — often lower effective rate |
| CGT discount | Available on some assets if held 12+ months | 50% CGT discount if shares held 12+ months |
| Small business CGT concessions | Can apply to business assets | Can apply if the active asset test met |
| Stamp duty | Applies in most states | Lower or exempt in many states |
| Buyer preference | Strongly preferred — a clean start, fresh depreciation | Less preferred — inherits unknown liabilities |
| Negotiation position | Buyer has leverage | Seller has leverage if the business is desirable |
Table 1: Asset Sale vs Share Sale — Quick Comparison
Under the ATO small business CGT concessions, eligible business owners may reduce or even eliminate CGT on the sale of active assets — but this only applies to asset sales, not always share sales.
Why Most Buyers Will Push for an Asset Sale
Most buyers want an asset sale. This is important to understand before you start any negotiation.
Here is why buyers lean toward this structure:
- They get a clean start. They only take on what they choose — not hidden debts or unknown liabilities.
- They can depreciate the assets they buy from day one. This gives them tax advantages going forward.
- They avoid inheriting any legal, tax, or employment issues buried inside your company.
From the buyer’s perspective, an asset sale reduces risk. That makes it the preferred starting point in most negotiations.
The fact that buyers prefer asset sales gives sellers who want a share sale something important to negotiate with.
How to Negotiate the Sale Structure
Structure is negotiable. Do not accept the buyer’s first proposal without questioning it.
Here are practical steps to approach the conversation:
- Know your preferred structure before you begin. Calculate what each option means for your tax position. Your accountant can help you model both outcomes.
- Understand what the buyer needs. If a buyer insists on an asset sale, ask what is driving that position. Sometimes it is financing requirements. Sometimes it is risk management. Knowing the reason helps you find solutions.
- Offer a price adjustment. If a share sale costs the buyer more in risk, you may be able to offer a small price concession to make it worthwhile for them. The tax saving to you often outweighs that concession.
- Use warranties and indemnities strategically. Buyers often want asset sales because they fear hidden liabilities. Strong representations and warranties in a share sale contract can reduce that fear and move them toward your preferred structure.
- Get advice early. Bring your tax adviser and lawyer into the process before you accept any term sheet. After the heads of agreement are signed, it is difficult and impossible for anyone to change the structure.
Preparation is your strongest negotiating tool. Sellers who understand both structures clearly always negotiate better outcomes.
When a Share Sale Wins for the Seller
A share sale is usually the better outcome for a seller. Here, it makes the strongest case:
- Your company has a clean history with no significant liabilities. A buyer’s concerns about hidden risk are minimal.
- You have held your shares for more than 12 months. The CGT discount is available and reduces your tax bill immediately.
- Your business qualifies for the small business CGT concessions. You may be able to reduce your capital gain substantially — or eliminate it entirely.
- Your business is desirable with multiple buyers interested. Competition gives you more leverage to set the terms, including the structure.
- You have personal superannuation planning in place. The retirement exemption allows up to $500,000 of capital gain to be contributed to super tax-free. This is a powerful strategy for business owners approaching retirement.
Even when a buyer initially pushes for an asset sale, sellers with desirable businesses can often negotiate a share sale successfully.
Frequently Asked Questions
Can I negotiate the sale structure with any buyer?
Yes. The structure is always open for negotiation. Most buyers start with asset sale proposals. That does not mean you must accept it. Experienced advisers negotiate share sales regularly, even when buyers initially resist.
What are the small business CGT concessions?
The small business CGT concessions are four tax reliefs available to eligible Australian small businesses. They include the 15-year exemption, the 50 percent active asset reduction, the retirement exemption, and the rollover provision. They apply to both asset sales and share sales under certain conditions. Together, they can reduce or eliminate a significant capital gain. Speak to a qualified tax adviser to understand which ones apply to your situation.
Does stamp duty apply to business sales?
In an asset sale, stamp duty typically applies to the transfer of certain assets — particularly land and equipment. In a share sale, stamp duty is generally lower, and in some states, it is exempt for share transfers. This is another reason sellers often prefer share sales.
What if my business has existing debts or liabilities?
This is one reason buyers often prefer asset sales. They do not want to inherit your liabilities. In a share sale, you can address this through price adjustments, warranties, and indemnities in the sale contract. Your legal adviser can help you structure these protections effectively.
Can I complete a share sale even if my company has outstanding tax obligations?
Yes — but the buyer will want certainty about the extent of those obligations. Clean financial records and a clear tax position strengthen your negotiating position. Your accountant should prepare a clear tax reconciliation before you go to market.
Is it worth getting advice before I agree to any structure?
Absolutely. The difference in tax outcome between structures can be significant — sometimes hundreds of thousands of dollars. A qualified accountant and business law solicitor can model your options before you sign anything. The cost of that advice is small relative to the potential savings.
Action Steps to Improve Your Sale Outcome
The good news: you can prepare for this right now. These steps will put you in a stronger position when it is time to sell.
- Model both structures with your accountant. Get a clear picture of what each option means for your after-tax proceeds. Do this before you enter any negotiation.
- Review your company records. Clean financial records, organised contracts, and clear employee arrangements make a share sale easier to defend to a buyer.
- Check your eligibility for small business CGT concessions. These concessions exist specifically to help business owners like you. Ensure you know which ones apply.
- Prepare a clean liability schedule. Know exactly what your company owes and to whom. Transparency builds buyer confidence in a share sale structure.
- Engage advisers before you go to market. A business broker, accountant, and solicitor working together from the start will help you protect your interests throughout the process.
- Consider your personal circumstances. Superannuation planning, timing of the sale, and personal tax position all interact with the sale structure. A complete plan looks at all of these together.
You do not need to have everything perfect before you start. You just need to start. Each step above moves you closer to a better outcome.
You Have More Control Than You Think
Many business owners enter a sale process without understanding the structure. They accept the buyer’s preferred terms because they do not know the alternative.
You now know the difference. That knowledge is valuable.
An asset sale is not automatically the wrong choice. A share sale is not automatically the right one. What matters is understanding your options — and making a deliberate decision based on your own financial position.
With the right advice and good preparation, you can negotiate a structure that works in your favour. Other business owners do this every day. You can too.
The sale of a business you have built is a significant moment. You deserve to walk away with the best possible result.
Start the conversation with your accountant today. Ask them to model both structures for your situation. That one conversation could make a real difference to your outcome. Choosing the wrong structure can cost you significantly — always consult a professional eg. CPA Australia before making a decision
Share Your Experience
Have you been through a business sale? Did you negotiate the structure — or did you wish you had known more about it beforehand?
We would love to hear from you. Leave a comment below and share what you learned. Your experience might help another business owner navigate the same decision.
If you have a question about your own situation, post it below. We read every comment and do our best to respond.
Every business sale is different. But every owner who shares their experience adds something useful to the conversation.
Legal & Tax Disclaimer
This article provides general information about Australian capital gains tax concessions for small business owners. It is not financial, tax, legal, or professional advice of any kind.
Tax laws change regularly. All figures — including contribution caps, thresholds, and exemption amounts — should be confirmed with the ATO or a registered tax agent before you rely on them. Every business is different. The examples used here are illustrative only and may not reflect your specific circumstances.
Before making any decisions about the value, sale, or structure of your business, always engage a qualified professional — such as a registered accountant, tax adviser, financial planner, business broker, or solicitor — who can properly assess your individual situation.
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