The Complete Due Diligence Checklist for Buying an Australian Business

A word before we start: due diligence is not a box-ticking exercise. It's an investigation. The checklist gets you started, but the real skill is following the threads — when one answer doesn't match another, when something feels off, when the numbers tell a different story than the seller. Trust the process, but trust your instincts too.

Part 1: Financial due diligence

This is where most buyers start, and for good reason. The financials either confirm the opportunity or kill the deal. Everything else is secondary if the numbers don't work.

Profit and loss (3–5 years minimum)

Request the full P&L for at least the last three financial years — five if available. You're looking for trends, not snapshots.

Balance sheet

• Debtors (accounts receivable): How old are they? Anything over 90 days is probably not collectible. What's the actual debtor collection rate, not the theoretical one?
• Creditors (accounts payable): Is the business paying suppliers on time? Late payments suggest cash flow stress — or a business milking its working capital cycle.
• Inventory (if applicable): When was it last counted? What's the obsolescence risk? In retail or wholesale businesses, inventory write-downs after settlement are a nasty surprise.
• Plant and equipment: What's on the books vs what's actually on the floor? Get a condition report for anything material. Replacement cost matters more than book value.
• Loans and liabilities: Everything owed by the business, including director loans, hire purchase agreements, and any debts not on the balance sheet (check the PPSR — more on this below).

Tax returns and BAS

• Compare the tax returns to the management accounts. If the P&L shows $400K profit but the tax return shows $280K, someone has two sets of books. This happens more often than you'd think.
• Request the last 8 quarters of BAS (Business Activity Statements). BAS tells you actual GST turnover reported to the ATO — it's much harder to fabricate than a P&L.
• Check for any outstanding ATO debt. Ask the seller to provide a running balance account from the ATO portal, or request an ATO clearance certificate. If they resist, that's a data point.
• Superannuation compliance: Has the employer been paying super on time for all employees? Late super payments carry penalties under the Superannuation Guarantee Charge, and as the new owner, you don't want to inherit that mess.

Cash flow

• Bank statements for the last 12–24 months. Not a cash flow forecast — the actual bank statements. These are the hardest documents to fabricate and the most revealing.
• Match bank deposits to reported revenue. If the P&L says $1.2M in revenue and the bank shows $950K in deposits, find out where the gap is.
• Seasonal patterns: When does the business need cash and when does it generate cash? If you settle in March and cash flow doesn't turn positive until September, you need six months of working capital reserves. (See our guide to financing a business acquisition for how to plan for this.)
• Loan repayments, HP commitments, and any automatic debits that won't appear on the P&L as headline items.

Part 2: Customer and revenue due diligence

The financials tell you what happened. The customer analysis tells you whether it's likely to keep happening.

Customer concentration

This is the single most underestimated risk in small business acquisitions.

• What percentage of revenue comes from the top 5 customers? If one customer represents more than 20% of revenue, you have a concentration problem. If the top 3 are over 50%, you're buying a business that's one phone call away from a crisis.
• How long have the top customers been with the business? Long tenure is good — but also ask whether they have contracts or just habit.
• Do customers buy from the business, or do they buy from the owner? If the top customer plays golf with the seller every Thursday, that relationship walks out the door at settlement.

Revenue quality

• Recurring vs one-off revenue: A $1M business with $800K in annual contracts is fundamentally different from a $1M business that re-sells its entire book every year.
• Pipeline and backlog: What's contracted but not yet delivered? What's in the pipeline but not yet contracted?
• Pricing power: When did the business last raise prices? What happened? If they haven't raised prices in three years, you're inheriting margin compression.
• Customer churn: How many customers left in the last 12 months? Why? Where did they go?

Contracts review

• Read every material customer contract — not the summary, the actual contract. Look for: term, renewal conditions, termination clauses (especially termination for change of ownership), exclusivity, and pricing mechanisms.
• Supplier contracts: same exercise. Especially any sole-supplier arrangements or contracts with minimum purchase commitments.
• Are any contracts verbal or handshake? In many small businesses, the biggest customer has never signed anything. That's not necessarily a dealbreaker — but it's a risk you need to price.

Part 3: Legal and regulatory due diligence

This is where the Australia-specific stuff lives. Miss any of these and you could be buying someone else's liabilities.

Entity and ownership searches

• ASIC company search: Confirm the entity details, directors, shareholders, registered office, and any outstanding ASIC documents or lodgements. Cost: $9 per search on ASIC Connect. Also search the directors' names on ASIC's Banned and Disqualified register — it takes 30 seconds and could save you from a catastrophe.
• PPSR search (Personal Property Securities Register): Search the business entity and ABN to identify any security interests registered against the business assets. This tells you whether equipment, vehicles, or stock are pledged as security for someone else's loan. A $2 search. There is no excuse for not doing this.
• ABN lookup: Confirm the ABN is active, check the GST registration date, and confirm the entity name matches what you've been told. Free at abr.business.gov.au.

Licences and permits

• What licences does the business need to operate? (Trade licences, building licences, EPA licences, food handling permits, transport permits — varies by industry and state.)
• Are they current? When do they expire? Are they transferable to a new owner?
• In Western Australia specifically: check the Department of Mines, Industry Regulation and Safety for any applicable occupational licensing. Tradies businesses (electrical, plumbing, building) require specific licence holders — if the licence holder is the departing owner, you have a problem.

Lease

The lease is make-or-break for any business that operates from a physical location.

• Remaining term: How long is left? A 12-month remaining lease with no option to renew means you might be buying a business that has to relocate in a year.
• Options to renew: How many? At what rent? Market review or CPI increase? An option with a "market rent review" is not the comfort blanket it appears — the landlord's idea of market rent and yours will differ.
• Assignment clause: Does the lease allow assignment to a new owner? Most commercial leases require landlord consent to assignment. Start this conversation early — landlord approval can take 4–8 weeks and some landlords use the assignment as leverage to renegotiate terms.
• Make good clause: What does the lease require you to do when you leave? Some make-good obligations run into tens of thousands of dollars.
• Personal guarantee: If the current owner has personally guaranteed the lease, will the landlord release them and accept your guarantee instead? If the landlord won't release the seller, the seller may be reluctant to complete the sale.

Intellectual property

• Business name registration (ASIC): Is the business name registered? To whom?
• Trade marks (IP Australia): Are there registered trade marks? Are they in the seller's name or the company's name?
• Domain names: Who owns the website domain? Where is it registered? When does it expire?
• Social media accounts: Can they be transferred? Platform terms of service vary — this is less straightforward than it sounds.

Litigation and disputes

• Are there any current or threatened legal proceedings? Against the business or by the business?
• Any WorkSafe or SafeWork investigations? Workers compensation claims history?
• Any disputes with the ATO? Any pending audits?
• The seller's warranty in the contract should cover "no undisclosed litigation" — but don't rely on a warranty when you can ask the question directly.

Part 4: People due diligence

In most small businesses, the people ARE the business. This section is where many first-time buyers do the least work and have the most regrets.

Employee details

• Full employee list with: role, start date, employment type (full-time, part-time, casual), current salary/hourly rate, and which modern award or enterprise agreement covers them.
• Leave balances: Annual leave, personal leave, and long service leave accruals for every employee. These are liabilities you inherit. A business with 8 employees carrying an average of 6 weeks annual leave each has $80K–$120K in leave liabilities sitting on the balance sheet (or not — which is worse).
• Long service leave: In most Australian states, long service leave accrues after 7–10 years of continuous service. Under a transfer of business (Part 2-8 of the Fair Work Act), the employees' continuous service transfers to you — including their long service leave entitlements.
• Superannuation: Is the employer up to date on super contributions for all employees? Check this independently — the Super Guarantee Charge for late payments includes interest, an admin fee, and is not tax-deductible.

Fair Work compliance

• Which modern award(s) apply to the employees? Is the business actually paying award rates, including penalty rates, overtime, and allowances? Underpayment claims are on the rise in Australia and the new owner can inherit liability for historical breaches.
• Are there any enterprise agreements in place? If so, these transfer to you automatically under the Fair Work Act's transfer of business provisions.
• Independent contractor arrangements: Are any "contractors" actually employees under the law? The ATO and Fair Work both take sham contracting seriously. If the business relies on contractors who work set hours, use the business's equipment, and can't subcontract — they're probably employees, and you're inheriting the back-pay liability.

Key person risk

• How central is the owner to day-to-day operations? To customer relationships? To staff management? To business development?
• What happens if the owner walks away on day one? Which customers call the owner's mobile directly? Which staff will only take direction from the owner?
• Is there a management layer below the owner? If not, you're not buying a business — you're buying a job.
• What's the transition plan? How long will the seller stay on? In what capacity? Is it in the contract?

Part 5: Operational due diligence

Systems and technology

• What software does the business run on? Accounting (Xero, MYOB, QuickBooks), CRM, job management, scheduling, inventory — get the full list.
• Are the software subscriptions in the business name or the owner's personal name? Transferring subscriptions can be surprisingly painful.
• Is there a website? Who built it? Where is it hosted? Do you get the source code and hosting access?
• Where is customer data stored? Is there a backup system? Is the data exportable?

Processes and documentation

• Are the core processes documented anywhere? In most small businesses, the answer is no — that's not necessarily a dealbreaker, but it affects your transition planning.
• How are jobs quoted, scheduled, and delivered? Is there a system, or does it live in the owner's head?
• What does onboarding look like for new employees? Is there a training process?

Plant, equipment, and vehicles

• Get a complete asset register with: description, age, condition, service history, and replacement cost estimate.
• For vehicles: registration, insurance, service records, and any finance commitments (cross-reference with PPSR search).
• For specialised equipment: maintenance records and remaining useful life estimates. A fleet worth $200K on the balance sheet but needing $80K in replacements within 18 months changes the deal economics.

Insurance

• What insurance does the business carry? Public liability, professional indemnity, workers compensation, business interruption, motor vehicle, property — get copies of all current policies.
• Claims history for the last 3–5 years. A business with frequent workers comp claims has either a safety culture problem or a claims management problem — both are your problem now.
• Can the existing policies be transferred or will you need new cover from settlement?

Part 6: The searches you must do (Australia-specific)

These are non-negotiable. Each costs between $2 and $50 and takes minutes. Skipping them is not being efficient — it's being reckless.

Spend $200 and an afternoon on these searches before you spend $10K on lawyers and accountants doing detailed due diligence. If anything comes up red, you've saved yourself serious money.

Part 7: The questions the seller doesn't expect

Every seller is prepared for "show me the financials" and "how many employees do you have?" These are the questions that reveal what the prepared answers don't cover:

1. "Walk me through how you spent last Tuesday." The seller's actual day — not their idealised version — tells you more about how the business runs than any org chart.

2. "What would break if you took a month off tomorrow?" The honest answer reveals every single-point-of-failure in the operation.

3. "Which customer would you be most worried about losing, and why?" This tells you about relationship dependency, competitive threats, and contract fragility in one question.

4. "What's the one thing you'd fix if you had unlimited budget?" The answer is usually the thing they've been avoiding — and it's now going to be your problem.

5. "Why are you really selling?" You'll get a polished answer the first time. Ask again differently in a later conversation. The real reason — burnout, health, family, a customer loss, a pending regulation — matters for how you structure the deal and the transition.

6. "Can I see the last 3 months of bank statements?" Watch the reaction. Hesitation here is the biggest red flag in due diligence. A seller who won't show you bank statements is a seller with something to hide.

7. "If I could speak to two of your employees before we finalise, who would you suggest?" And then ask: "Who would you not suggest, and why?" Both answers are informative.

When to walk away

Due diligence isn't just about understanding what you're buying. It's about knowing when not to buy.

Walking away is not failure. It's the discipline that separates people who buy good businesses from people who buy expensive problems.