The CGT event on a business sale happens on the date the contract is signed, and that date decides which income year the gain belongs to, not settlement. A return reporting the gain is a final return only where the vendor’s own entity or registration ceases. Going concern was decided in the contract, so what remains after settlement is the final BAS, the GST and ABN cancellations, and any adjustment for assets no longer held. PAYG instalments are calculated from a prior year’s position and can still include a gain the business will never earn again.
Where a company or trust made the sale, the proceeds sit inside that entity until they are formally moved to the vendor. Blackwattle Tax advises middle market vendors on the position after settlement, as part of the same engagement that covers selling a business.
The Four Dates That Decide What You Owe
Four different dates decide what a vendor owes after a business sale, and settlement is only one of them.
Date | What it decides |
Contract date | The CGT event, and which income year the gain falls in |
Settlement date | When assets, employees and registrations transfer |
30 June | Trust resolutions and superannuation contribution windows |
Lodgment date | The return itself, and several election deadlines that run from it |
Settlement is the date money moves, so it feels like the date that matters most. It is the only one of the four that does not decide a tax year. The other three run on their own calendar regardless of when the cash arrives, which is why a vendor tracking only settlement can miss all three.
Why Your Capital Gain Belongs to the Contract Year, Not Settlement
The CGT event on a business sale happens on the date the contract is signed, not the date the sale settles.
A contract signed in June and settled in August puts the capital gain in the income year that closed before any money changed hands. The vendor’s bank balance moves in one financial year. The tax liability sits in the one before it.
This also fixes which set of rules applies to the gain. A contract signed today keeps the current CGT discount for the whole life of that gain, even though a lower inflation-based discount and a minimum 30% rate take effect for gains accruing from 1 July 2027.
Final Return or Ordinary Return
A return reporting the gain is a final return only where the vendor’s own entity or registration ceases. A sole trader retiring, a company being wound up, and a trust vesting each lodge a genuinely final return.
Where the vendor continues trading other activities and sold one business or one division, the gain is reported in an ordinary return for that year, alongside everything else. Nothing about it is final, and treating it as final can mean overlooking obligations for the activities that continue.
What the Sale Adds to Your Tax Return
A business sale can add three different kinds of amount to the one return, and each is taxed differently.
The capital gain itself is what most vendors expect: the difference between the sale proceeds allocated to each asset and its cost base, reduced by the discount and any small business concessions the vendor qualifies for. Where the gains for the year are large enough, the return also needs a CGT schedule setting out each asset and event separately.
Trading stock sold as part of the deal is not a capital gain. It is ordinary income, reported at its full value in the year of sale.
Depreciating assets sold for more than their adjustable value produce a balancing adjustment that is assessable income. Sold for less, the shortfall is a deduction.
Three different amounts, three different characters, on the one return. Treating the whole sale price as a single capital gain figure misstates at least two of the three.
Closing Down GST, PAYG and Your Registrations
These steps apply once the selling entity’s registrations are no longer needed: because it is winding up entirely, or because it has stopped that particular activity.
The sale’s GST-free status as a going concern, under section 38-325 of the GST Act, was decided in the contract, before settlement. Where it did not qualify, standard GST applied to the taxable assets in the price.
The final Business Activity Statement covers the tax period up to the date GST registration ends, and needs to include the sale along with every other transaction in that period.
GST registration must be cancelled within 21 days of ceasing the activity it relates to, or of no longer needing it for any other reason. The ABN follows a longer clock: cancellation is required within 28 days once it is no longer needed.
Cancelling registration can also trigger a GST adjustment. Where credits were claimed on an asset the business no longer holds, some or all of that credit may need to be repaid.
PAYG withholding is cancelled alongside the ABN, once there are no more wages to withhold from. This is a separate system from PAYG instalments, covered next, and cancelling one does nothing to the other.
Cancel GST and PAYG withholding before the ABN: cancelling the ABN first can close portal access needed to lodge the final BAS and the Single Touch Payroll finalisation declaration.
The Instalments That Keep Arriving
PAYG instalments are set from a prior year’s tax position, and that position can still include the year the business was sold.
Once the sale-year return is lodged, the instalment amount for the following year can be calculated from tax that included a one-off capital gain the business will never earn again. The instalment then overstates what the vendor owes for a year with nothing like that gain in it.
This is a different system from PAYG withholding, which is cancelled with the ABN once there are no more employees. Instalments are the vendor’s own prepayments against their own income tax. They continue after the business that generated the gain is gone.
An instalment amount that no longer reflects reality can be varied. Varying your PAYG instalments sets out how, and by when, to avoid a penalty for getting the variation wrong.
Moving Superannuation Before the Window Closes
Two superannuation opportunities tied to the sale run on their own deadlines, separate from when the return itself is lodged.
A CGT cap election allows an eligible contribution to sit outside the normal concessional and non-concessional caps. The election has to be made in the approved form, and the timing that counts is tied to the contribution, not to the due date of the return, so this is worth settling as part of the sale itself rather than leaving until the return is prepared.
Where the retirement exemption is being used and the vendor is under 55, the exempt amount has to be paid into a complying superannuation fund or retirement savings account within the period the exemption requires. Missing that window does not only delay the contribution. It can undo the exemption already claimed on the return, turning a disregarded gain back into an assessable one.
Both elections interact with the small business concessions already claimed on the sale. Confirm the contribution amount and timing before the return that claims the concession is finalised, not after.
Getting the Proceeds Out of the Selling Entity
This section applies where a company or trust sold the business as an asset sale. Where the sale was a disposal of shares, the proceeds already belong to the vendor personally, and none of this applies.
The company sold the business. The shareholder has not received anything yet. Money sitting in the company’s bank account belongs to the company until it is formally paid out, and paying it out is a second, separate tax event from the sale itself.
The legitimate paths out are a franked dividend, a capital return, or, where the company has served its purpose, formal liquidation. Each carries its own tax consequence for the shareholder receiving it, and the right choice depends on what else the shareholder earns that year and on what happens to the company afterward.
The trap is Division 7A. An informal loan or payment to a shareholder or an associate, made outside one of these paths, can be treated as an unfranked dividend and taxed at the shareholder’s full marginal rate, with none of the planning a proper distribution allows.
Where liquidation is the path being considered, the process and its tax consequences are covered in full there.
Trust Resolutions Where the Business Was Held in a Trust
Where the business was held in a trust, the trustee still has to resolve how the capital gain is dealt with by 30 June of the income year the contract falls in, regardless of when settlement lands.
Miss that resolution and the gain is taxed to the trustee at the top marginal rate, rather than streamed to a beneficiary who might have had a concession or a lower rate available. Where the contract predates settlement by more than a few months, check that this resolution was made before assuming it still can be.
How Long to Keep the Records
Keep every record connected to the sale, contracts, valuations, cost base workings and correspondence, for at least five years after the sale.
Where the deal includes a look-through earnout right, that period runs longer. The review period extends to four years after the last income year a benefit could still be paid under the earnout, which can push retention well past the ordinary five years. Keep records for the longer of the two.
When the Price Changes After Settlement
Not every post-settlement price change is the same kind of event.
An earnout payment amends the original sale year under look-through treatment, changing a gain already reported. A deferred settlement is a known amount that was always going to arrive later, and its arrival amends nothing, because it was never uncertain in the first place.
What to Settle Before You Lodge
Most of what catches vendors out after a sale was decided by a date that has already passed, and the return still has to reflect it correctly.
- Year: Confirm which income year the contract date falls in, not the year settlement happened to land in.
- Return type: Check if this needs to be a final return or an ordinary one that happens to include the gain.
- Instalments: Flag the next instalment for variation if the base year included the gain.
- Proceeds: Settle how money moves out of the selling entity before it sits idle.
Our Chartered Accountants advise vendors on capital gains tax, GST and the position after settlement across the middle market. Book a free 30-minute strategy session with one of our directors to confirm where you stand.
Frequently Asked Questions
Do you have to pay GST on the sale of a business?
Only where the sale did not meet the going concern conditions in section 38-325 of the GST Act. Where those conditions are met, the supply is GST-free and no GST is added to the sale price.
What are the tax implications of selling a business as a going concern?
The main effect is removing GST from the transaction, where the purchaser is registered for GST and both parties agree in writing that the business is sold as a going concern. This is decided in the contract, before settlement.
Is the return that reports my sale a final return?
Only where your own entity or registration ceases. Where you continue trading other activities, the gain is reported in an ordinary return for that year alongside everything else.
How much tax do I pay if I sell my business?
There is no separate rate for a business sale. The net gain, after any discount and small business concessions, is added to assessable income and taxed at whatever rate already applies to you or your entity.
Schedule a FREE 30-minute consultation today to discover how we can help you make strategic decisions and streamline your business operations.
Stay informed and empowered by subscribing to our monthly newsletter, where you’ll receive valuable insights on business advice, investment tips, and strategic tax planning.
Disclaimer: We endeavour to make sure the information provided in this guidance is up to date and accurate. Please note, that the information is only intended to be a guide, with a general overview of information. This guidance is not a comprehensive document and should not be interpreted as legal advice or tax advice. The information is general in nature. You should seek the assistance of a professional opinion for any legal and tax issues related to your personal circumstances.