Buyer Guide
Every business acquisition in Australia comes down to a structural question that most first-time buyers don't think about until their lawyer raises it: are you buying the business's assets, or are you buying the company itself? It sounds like a technicality. It isn't. This single decision affects what liabilities you inherit, how much tax the seller pays (and therefore how much they need from you), whether contracts and licences transfer automatically, what happens with employees, and how the bank views your loan application. Get it wrong and you could be paying for someone else's mistakes — literally.
Asset sale: You buy specific assets from the business — the equipment, the customer list, the brand, the stock, the goodwill. You choose what you take. The company that owned those assets continues to exist; you just bought its stuff. Think of it like buying the contents of a house, not the house itself.
Share sale: You buy the shares in the company that owns the business. The company doesn't change — same ABN, same contracts, same bank accounts, same everything. What changes is who owns the company. Think of it like buying the house and everything in it, including whatever's hidden in the walls.
That "hidden in the walls" part is the key tension. And it's why most buyers prefer asset sales while most sellers prefer share sales.
The seller's preference for a share sale usually comes down to three things.
This is the big one. Australia has four small business CGT concessions under Division 152 of the Income Tax Assessment Act 1997, and they can dramatically reduce the seller's tax bill:
The critical point: these concessions are generally easier to access in a share sale when the seller is an individual or a discretionary trust holding shares. In an asset sale, the disposing entity is usually the company — and companies can't access the 50% CGT discount. The maths can result in the seller paying hundreds of thousands more tax on an asset sale.
This is why sellers care so much about structure. A seller who faces a $200K tax difference between structures will either insist on a share sale or increase their asking price to compensate.
In a share sale, the seller transfers their shares and walks away. No need to individually assign every contract, every licence, every lease, every employee arrangement. The company — with all its relationships intact — simply has a new owner.
One transaction. Shares change hands. Done. No need to negotiate which assets are in and which are out, no GST complications, no stamp duty on asset transfers.
In an asset sale, you pick exactly which assets you want and leave behind the ones you don't. That old printer nobody uses? Leave it. The vehicle with 300,000km? Not yours. The customer contract with terrible payment terms? You can decide whether to assume it or not. More importantly, you leave behind the liabilities you can see — and the ones you can't.
This is the single biggest reason buyers prefer asset sales. When you buy shares in a company, you buy everything that company owes. Everything:
In an asset sale, these stay with the seller's company. In a share sale, they become your problem the moment you sign. Yes, the seller gives you warranties and indemnities. But a warranty is only as good as the seller's ability to pay if you need to claim on it. If the seller retires to Queensland and spends the proceeds, good luck recovering your losses three years later when the ATO comes knocking for $150K in unpaid super.
When you buy assets, you get them at their purchase price for tax purposes. That means you can depreciate the goodwill, the plant and equipment, and other depreciable assets from a fresh base. Over time, this generates real tax deductions.
In a share sale, the company's existing tax base carries forward. The equipment that's already been fully depreciated? Still fully depreciated. No new deductions for you, even though you just paid good money for it.
For a $1M acquisition where $600K is allocated to goodwill and $200K to depreciable plant and equipment, the tax depreciation difference over 5–10 years can be worth $100K+ in real tax savings.
As a general rule: share transfers are exempt from stamp duty in Australia, while asset transfers may attract stamp duty depending on what's being transferred and which state you're in.
However — if the company holds land or property, a share sale can trigger "landholder duty" in most states. This is a stamp duty charged on the acquisition of shares in a company that holds land above a certain threshold:
| State / Territory | Landholder duty threshold |
|---|---|
| NSW | $2M in land value |
| VIC | $1M in land value |
| QLD | $2M in land value |
| WA | $2M in land value |
| SA | No threshold (all landholders) |
Don't assume share sale means no stamp duty. Get your lawyer to confirm for your specific deal and state.
The seller wants a share sale (for the tax concessions). You want an asset sale (for the liability protection and depreciation benefits). This is one of the most common tensions in Australian business negotiations. Both sides have legitimate reasons. Here's how to navigate it.
If the seller's tax difference between an asset sale and a share sale is, say, $150K, you can split that difference. Increase your offer by $75K to compensate for their higher tax bill, and you still come out ahead because you get the depreciation benefits and liability protection.
This requires both sides to actually run the numbers — which means both accountants need to be involved early, not after heads of agreement are signed.
If the seller insists on a share sale and the overall deal makes sense, you can agree — but your sale agreement needs to be bulletproof:
Our due diligence checklist covers exactly what to check in both scenarios.
Some deals use a hybrid approach. The seller sells the shares but first "cleans" the company by extracting excess cash, paying off all debts, settling any known disputes, and providing a tax compliance audit. You get a company with nothing in it except the operating business. This takes more time and legal cost to set up, but it can give both sides what they want.
Asset sale: The employees were employed by the old company. Under the transfer of business provisions in Part 2-8 of the Fair Work Act, if the employees accept employment with you within 3 months and the work is substantially the same, their continuous service transfers — including accrued leave entitlements and unfair dismissal protections. If an employee doesn't transfer (or isn't offered a role), the old company may need to pay out their entitlements, including redundancy if applicable. This should be negotiated as part of the deal — specifically, who bears the cost of employee entitlements at settlement.
Share sale: Nothing changes for the employees. They're employed by the company. The company still exists. Their entitlements, leave balances, and service periods all continue uninterrupted.
Either way, you're paying for accrued leave liabilities. The question is whether the cost is visible (asset sale, adjusted in the purchase price) or buried in the company balance sheet (share sale).
Asset sale: Every contract needs to be assigned or novated to you — customer contracts, supplier agreements, insurance policies, software subscriptions. Each one needs the other party's consent. Some contracts have assignment clauses that make this straightforward. Others have "change of control" clauses that allow the other party to terminate. And some contracts — particularly government contracts, licences, and regulated industry permits — may not be assignable at all.
The lease is the most critical one. Landlord consent to assignment can take weeks and may come with conditions. See the lease section of our due diligence checklist for what to check.
Share sale: The contracts stay with the company. No assignment needed. Licences — trade licences, liquor licences, environmental permits — are held by the company and continue. This is a significant advantage in heavily regulated industries where re-applying for a licence would take months or might not succeed.
In an asset sale, the transfer of business assets is generally subject to GST — which would add 10% on top of the purchase price. The solution is the "going concern" exemption under Division 38 of the GST Act. If the business is sold as a going concern (meaning it's an ongoing enterprise capable of operating, with everything the buyer needs to continue operating it), and both parties are registered for GST, the sale is GST-free.
To qualify for the going concern exemption
If the going concern exemption fails — because the seller stopped operating before settlement, or a critical asset was excluded — GST applies to the entire purchase price. That's a 10% surprise on a $1M deal. Make sure your lawyer gets this right.
In a share sale, GST isn't an issue. Shares are a financial supply and are input-taxed under the GST rules.
| Factor | Favours asset sale | Favours share sale |
|---|---|---|
| Liability protection | Strong — leave it behind | You inherit everything |
| Tax depreciation (buyer) | Fresh base | Existing base continues |
| Seller's CGT concessions | Harder to access | Easier, especially for individuals |
| Stamp duty | May apply to assets | Generally exempt (unless landholdings) |
| GST | Going concern exemption available | Not applicable |
| Contract continuity | Requires assignment | Automatic |
| Licence continuity | May need re-application | Stays with company |
| Employee transfer | Fair Work provisions apply | Seamless |
| Due diligence burden | Lower — you choose what you buy | Higher — you need to check everything |
| Speed and simplicity | Slower — more moving parts | Faster — one transaction |
For most small business acquisitions in the $500K–$2M range where the business is operated through a company, the buyer is usually better off with an asset sale. The liability protection and tax depreciation benefits outweigh the administrative complexity, especially when the going concern exemption handles the GST issue.
For businesses in regulated industries (where licence transfer is complex or impossible), businesses with significant property holdings, or deals where the seller's tax position creates a price gap you can't bridge — a share sale with strong warranties may make more sense.
But here's what actually matters: don't let the structure be an afterthought. Discuss it in your first substantive conversation with the seller, before anyone drafts heads of agreement. The longer you leave it, the more entrenched both sides become, and the harder it is to find a structure that works for everyone.
Scenario 1: The undisclosed ATO debt
You buy shares in a company. Six months later, the ATO issues an assessment for $180K in unpaid superannuation guarantee charges from two years before settlement. The seller's warranties cover this — but the seller has already distributed the sale proceeds and claims they can't pay. You're now funding litigation to recover a warranty claim while paying the ATO bill yourself. In an asset sale, this stays with the old company.
Scenario 2: The depreciation miss
You buy shares for $1.2M. The company's assets were largely depreciated years ago — the tax written-down value of plant and equipment is $50K. You get no new depreciation deductions on the $800K of goodwill or the $200K of equipment you effectively paid for. In an asset sale, that's potentially $100K–$150K in tax savings over 10 years that you'd have access to.
Scenario 3: The licence trap
You do an asset sale for a waste management business. Two months after settlement, you discover the EPA licence can't be transferred — it was issued to the old company and the application for a new one takes 6 months. You now own a waste management business that can't legally manage waste. A share sale would have kept the licence inside the company you bought.
None of these are hypothetical. They happen in Australian small business transactions all the time.
Two professionals need to be involved before you decide on structure:
Your accountant should model both scenarios — asset sale and share sale — for both buyer and seller. What are the tax consequences for each party under each structure? Where's the gap? Can a price adjustment bridge it?
Your lawyer should assess the liability risks, the contract assignment requirements, and the specific regulatory environment. They should also review the seller's proposed sale agreement — the warranties and indemnities are where the real protection lives in a share sale.
Don't rely on the broker to guide this decision. The broker's job is to get the deal done. Your job is to make sure the deal is right.
ThatDeal provides intelligence on Australian business acquisitions. We make the broker calls so you don't have to.
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