When buying a business in Australia, the amount you pay for GST and stamp duty largely depends on how the transaction is structured. GST may not be payable if the sale qualifies as a “going concern,” while stamp duty may still apply depending on the assets included in the transaction and the state or territory where the business operates.
Whether you are acquiring a café, an online store, a franchise, or a long-running company, understanding how GST and stamp duty work can help you avoid unexpected costs and structure the purchase more efficiently.
If you are planning to acquire a company, it is also important to understand the broader buying a business in Australia process, including tax obligations and due diligence considerations.
Key Takeaways: GST & Stamp Duty When Buying a Business
- GST may not apply if the business sale qualifies as a GST-free going concern.
- GST usually applies when only individual business assets are purchased.
- Stamp duty is determined by state law and may apply to property or certain business assets.
- Buyers may need to fund GST at settlement, even if it can later be claimed as an input tax credit.
- Understanding the transaction structure and tax treatment before signing the contract can help avoid unexpected costs.
GST When Buying a Business
In Australia, Goods and Services Tax (GST) is generally charged at 10% on most goods and services. However, when buying a business, GST does not always apply to the full purchase price.
The determining factor is how the business sale is structured.
Typically, business acquisitions fall into two main categories:
- Sale of a going concern
- Sale of individual business assets
The GST outcome varies depending on which structure applies to the transaction.
When GST Does NOT Apply
Many business transactions are arranged as the sale of a going concern. When a sale meets the legal requirements of a going concern, GST is not added to the purchase price.
For a sale to qualify as a going concern:
- The business must be transferred as a continuing operation
- All essential assets required to run the business must be included
- The seller must continue operating the business until settlement
- Both parties involved in the transaction must be registered for GST
- The contract must clearly state that the transaction is the sale of a going concern
However, incorrectly applying the GST going concern rules can create serious tax risks for both buyers and sellers.
If these conditions are met, the transaction becomes GST-free, resulting in substantial savings for the buyer.
Example
| Business Price | Going Concern | GST Payable |
|---|---|---|
| $1,000,000 | Yes | $0 |
| $1,000,000 | No | $100,000 |
Avoiding GST in this scenario can save the buyer $100,000 at settlement.
When GST DOES Apply
GST may become payable when the transaction does not meet the requirements for a GST-free going concern under Australian tax law.
This may occur in several situations, including when:
- The business had stopped operating before settlement
- Only selected business assets are being purchased
- The buyer is not registered for GST
- The purchase agreement does not include a going concern clause
In these cases, GST may apply to various assets involved in the sale, such as:
- Equipment and machinery
- Trading stock or inventory
- Intellectual property
- Goodwill
- Software platforms or operational databases
If GST applies, it is generally added on top of the purchase price.
Buyers who are registered for GST can usually claim the amount back later as an input tax credit, but the payment still needs to be funded at settlement.
Share Sale vs Asset Sale
Another factor that affects GST treatment is whether the transaction is structured as a share sale or an asset sale.
- Share sale: the buyer purchases shares in the company that owns the business. GST generally does not apply.
- Asset sale: the buyer purchases individual business assets, which may trigger GST unless the transaction qualifies as a going concern.
Because each structure has different tax implications, the deal structure should be reviewed carefully before the purchase agreement is signed.
Buyers should also understand how ABN and ACN registrations work in Australia, especially when acquiring or restructuring a company.
What Is Stamp Duty When Buying a Business?
Unlike GST, stamp duty is imposed by individual states and territories. It applies to certain transfers of property or assets in a business sale.
Stamp duty is not usually calculated on the entire business value. Instead, it generally applies to specific dutiable assets involved in the transaction.
These assets can include:
- Commercial property or land
- Leasehold interests
- Motor vehicles or business equipment
- Certain licences
- Intellectual property (in some jurisdictions)
Because stamp duty is regulated at the state level, the rules and rates vary significantly across Australia.
When Stamp Duty Applies in a Business Purchase
Stamp duty may apply when the business sale includes assets classified as dutiable property under state law.
Examples include:
- Commercial property or land transfers
- Leasehold rights associated with the business
- Certain intellectual property rights
- Vehicles or specialised equipment
- Regulatory licences or permits
Some states apply stamp duty mainly to land-related assets, while others extend the tax to additional business assets.
Stamp Duty When Buying a Business in Each Australian State
| State | Stamp Duty Treatment |
|---|---|
| Queensland (QLD) | Stamp duty may apply to certain business assets including goodwill, calculated using a sliding scale. |
| Western Australia (WA) | Duty may apply to business assets such as goodwill depending on the transaction value. |
| New South Wales (NSW) | Duty on business assets (excluding land) was abolished in 2016, but property transfers remain subject to stamp duty. |
| South Australia (SA) | Duty on goodwill and most non-land business assets has been removed. |
| Victoria (VIC) | Commercial and industrial property moved to the Commercial and Industrial Property Tax (CIPT) system. Duty is paid once at purchase, followed by an annual land tax after 10 years. |
Because these rules vary between states, buyers should review state-specific regulations before finalising the transaction.
How GST and Stamp Duty Work Together
A common misconception is that GST and stamp duty operate in the same way. In reality, they are separate taxes governed by different laws.
| Tax Type | What It Applies To | Who Pays |
|---|---|---|
| GST | Business sale or business assets (unless treated as a going concern) | Buyer |
| Stamp Duty | Certain transferred assets such as property, licences, or equipment | Buyer |
Depending on the deal structure:
- GST may be exempt while stamp duty still applies
- GST may apply even when stamp duty is not payable
For example, a business sold as a going concern may avoid GST but still attract stamp duty if property or vehicles are included in the transaction.
Why Business Buyers Often Get This Wrong
Many buyers focus only on negotiating the headline purchase price, but the real cost of buying a business can include additional expenses.
These may include:
- GST obligations
- Stamp duty
- Legal fees
- Accounting and advisory services
- Licence transfer costs
Without proper planning, these costs can significantly increase the total investment required to complete the purchase.
Before completing a transaction, it is important to review a detailed business purchase due diligence checklist to identify financial, tax, and compliance risks.
Key Things to Check Before Buying a Business
Before finalising a business acquisition, it is important to review several key details.
Make sure you understand:
- Whether the transaction qualifies as a going concern
- Which assets are included in the sale
- Whether GST will be applied
- Whether stamp duty applies in the relevant state
- Whether the contract clearly outlines the tax treatment
A poorly structured agreement can lead to unexpected tax obligations after settlement.
This is why it is strongly advisable to seek professional business advisory services before signing the purchase agreement, not after the transaction is complete.
Final Thoughts
Buying a business involves more than negotiating the purchase price. Understanding how GST, stamp duty, and transaction structure affect the total cost can make a significant difference to your investment.
Because the tax treatment varies depending on the deal structure and the state where the business operates, obtaining professional tax advice before signing the purchase agreement can help you avoid costly surprises.
Need Help With GST & Tax When Buying a Business?
If you need guidance on GST, tax planning, or business acquisition structuring, the team at Infinity22 can help you navigate the process with clarity and confidence.
Talk to Infinity22 today to discuss your tax and business advisory needs.
FAQs
Do you pay GST when buying a business in Australia?
Not necessarily. If the sale qualifies as a going concern, GST is usually not charged. Otherwise, GST may apply to the purchase price or individual assets.
Is stamp duty payable when buying a business?
It depends on the assets involved and the state where the transaction occurs. Stamp duty commonly applies when the sale includes property or other dutiable assets.
What is a going concern for GST purposes?
A going concern means the business is sold as a fully operating entity, allowing the buyer to continue trading immediately.
Who pays GST when a business is sold?
In most cases, the buyer pays GST, although GST-registered buyers can often claim it back as an input tax credit.
Can GST and stamp duty both apply to a business purchase?
Yes. In some transactions, both GST and stamp duty may apply, particularly when property, vehicles, or other dutiable assets are transferred.
