Buying or selling a business: the compliance transfer checklist

Asset sale or share sale: the question that sets the checklist

Whether the transaction is an asset sale or a share sale determines almost every compliance question that follows: in an asset sale nothing transfers automatically, and in a share sale everything does.

In an asset sale, the buyer acquires identified assets — plant, stock, goodwill, intellectual property, nominated contracts. The selling entity survives, and its registrations, including its Australian Business Number and tax registrations, stay with it. Licences must be applied for afresh or formally transferred, and contracts require assignment or novation with each counterparty holding a consent right.

In a share sale, the buyer acquires the entity itself. The ABN, tax registrations, licences, contracts and employment relationships continue undisturbed because the legal person holding them has not changed — along with every historical liability, disclosed or not.

The tax treatment diverges as sharply; concessions on an asset disposal are examined in CGT small business concessions under Division 152.

Licences and permits: the longest lead time in the deal

Licence transfer is the most under-scheduled item in Australian business sales. The Australian Government's guidance on selling your business states that transfers can take up to 12 months and advises planning early — realistic for any regime requiring probity assessment of the incoming holder. Build the licence map before the contract is drafted.

The categories to check:

• Occupational and trade licences — builders, electrical, plumbing and gas licensing sit with state regulators. See builders licensing by state.
• Liquor and gaming licences — probity checks on the incoming licensee make these the slowest. See liquor licensing by state.
• Labour hire licences — mandatory in several states, attached to the provider entity. See labour hire licensing by state.
• Financial services and credit licences — cannot be assigned; the buyer needs its own authorisation or an authorised representative arrangement.
• Sector registrations — NDIS, aged care, food business, environmental approvals and dangerous goods licences each carry their own procedure.

The Australian Business Licence and Information Service at ablis.business.gov.au identifies every federal, state and local licence attached to an activity and location. Run it for the target's actual operations, not its industry code, then use the obligation finder.

Registrations that do not travel

In an asset sale the seller's registrations do not transfer, and the buyer must hold its own before it trades:

• an ABN in the acquiring entity's name — see ABN application
• GST registration where projected turnover meets the threshold — see GST registration thresholds and register for GST
• PAYG withholding registration where employees will be engaged
• payroll tax registration where the wages bill crosses the state threshold — see payroll tax by state
• workers compensation cover in each state, in force from the first day of employment
• the business name, transferred rather than newly registered where continuity matters

The business name transfer has an unforgiving mechanic. The current holder starts the transfer, producing a transfer number the buyer uses to register the name. ASIC states the number is valid for four months and 28 days, after which the name becomes available to anyone; that the holder's registration is cancelled within 28 days of submitting the transfer; and that renewal periods do not carry over and no refund is given. See ASIC's transfer a business name guidance. A transfer is also needed where a structure change produces a new ABN.

The seller's cancellations run in a fixed order: PAYG withholding first, then the ABN. Cancelling the ABN automatically cancels GST, luxury car tax, wine equalisation tax and fuel tax credits, and business.gov.au's cancel an ABN guidance is explicit that obligations to every agency must be met before cancelling.

Records: who keeps what, and for how long

The seller keeps its statutory records after completion, and the retention clock does not reset because the business changed hands. The ATO's guidance on selling or closing your business – records states that records must be kept for five years from when they were prepared or obtained, or the transaction completed, whichever is later, and can still be requested in a review or audit after a business is sold.

Retention layers apply in parallel and should be allocated expressly in the sale agreement:

The ATO notes that other regulators may require seven years. The Corporations Act position is in company registers and registered office obligations and indexed at keep company records for seven years.

Where personal information — employee, customer or supplier data — is disclosed to a prospective buyer during due diligence, the Australian Privacy Principles apply. Data room design, not just the sale agreement, needs to reflect it.

Employees and the transfer of employment

In an asset sale the seller's employment relationships end and the buyer decides whom to offer employment to; in a share sale nothing changes because the employer entity is unchanged.

Where employment ends with the seller, business.gov.au states that under the Fair Work Act 2009 the seller must give employees written notice that their employment is ending, or payment in lieu, including employees transferring to the new owner. The seller must also give the new owner all relevant employee information, and some entitlements must be recognised by the new employer while others need not.

The recognition rules for service, leave and redundancy are covered in transfer of business under Part 2-8 of the Fair Work Act. Model the treatment before pricing: unrecognised accrued leave becomes a cash payment at completion, and recognised leave a liability the buyer inherits.

Two adjacent items are often missed. Single Touch Payroll finalisation for the departing employer must be completed for the part-year — see STP Phase 2 reporting obligations. And final-quarter superannuation guarantee remains the seller's liability, with Director Penalty Notices sitting behind it.

Security interests, leases and third-party consents

Every asset the buyer thinks it is acquiring should be searched on the Personal Property Securities Register before completion, because a registered security interest survives a sale in most circumstances and the buyer takes the asset subject to it.

The PPSR covers security interests in personal property — plant, equipment, vehicles, stock, intellectual property and receivables, but not land. Searching the seller entity and the serial numbers of significant assets regularly finds financed equipment without clear title. Where interests are found, completion needs releases, not warranties.

The parallel exercises:

• Leases. Premises leases require landlord consent to assign, and retail leases in most states carry a statutory disclosure process with its own timing. business.gov.au notes the seller remains responsible for lease obligations until transfer.
• Contract assignment and change of control. In a share sale the change-of-control clause is the operative risk; in an asset sale it is the assignment clause. Track both in the contract register.
• Standard form terms. Where the business trades on standard form contracts with consumers or small businesses, the unfair contract terms regime applies and carries penalties — see the ACCC's contracts guidance and unfair contract terms and the penalty regime. A buyer inherits the exposure.
• Intellectual property. Trade marks, domains and licences-in each have their own assignment mechanism.

The notification sequence after completion

Notifications after completion run from the date of the change, not from the day someone gets to them, and several run in parallel.

Transfer duty is a state and territory tax, and both the rate and what counts as dutiable property differ by jurisdiction. Confirm the position with the revenue office in each state where dutiable property sits. Land holdings bring their own annual liability — see land tax by state. Where the seller intends to close the entity afterwards, the steps are in closing a company properly.

A sequenced checklist

Run the programme in this order. Items 1 to 4 belong before the contract is signed.

1. Fix the structure — asset sale or share sale, on tax and liability grounds.
2. Map the licences using ABLIS, and confirm the transfer pathway and lead time for each.
3. Search the PPSR against the seller entity and significant assets, and identify the releases needed.
4. Review the contracts for assignment and change-of-control restrictions, and list every consent.
5. Establish the buyer's registrations — ABN, GST, PAYG withholding, payroll tax, workers compensation — effective from completion.
6. Start the business name transfer and diarise the transfer number expiry.
7. Deal with employees — notice or payment in lieu, employee information to the buyer, entitlements agreed and priced.
8. Allocate the records in the sale agreement: who holds each category, for how long, on what access terms.
9. Complete, then lodge the 28-day ASIC notifications, the duty lodgement and any licence notifications, and cancel the seller's registrations — PAYG withholding, then ABN.

Load the deadlines into the compliance calendar at signing, not at completion. Most failures here are timing failures rather than analytical ones.