Selling Your Business? Agreement for Goodwill, Staff & Stock

In Australian practice, a sale of business agreement (also called a business sale contract) documents an asset sale. The entity that owns the business, whether a sole trader, partnership, trust or Pty Ltd company, stays with the vendor. What changes hands are the assets listed in the schedules, and liabilities do not follow them unless the contract says so. Each asset moves by its own mechanism: equipment by delivery, the lease by assignment with landlord consent, a registered business name through ASIC, and some licences only by fresh application.

The alternative is a share sale, where the purchaser acquires the shares in the company and inherits everything inside it, good and bad. Share sales are governed by the Corporations Act 2001 (Cth), the constitution and any existing shareholders agreement for a Pty Ltd company, and they call for heavier due diligence. A heads of agreement is different again: it is usually non-binding, whereas the sale of business agreement is the binding instrument on which settlement depends.

No single statute governs business sales in Australia. Contract law does the work, overlaid by legislation that shapes almost every clause. On tax, the anchor is s 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth). A going concern sale is GST-free only if it is for consideration, the purchaser is registered or required to be registered for GST, the vendor supplies everything necessary for continued operation and trades until the day of supply, and the parties agree in writing that it is a going concern. The ATO sets out its position in its guidance on GST-free sales of a going concern, read with ruling GSTR 2002/5. If a condition fails and the contract has no gross-up clause, the price is treated as GST-inclusive and the vendor loses one eleventh of it to the ATO.

Employment is handled by Part 2-8 of the Fair Work Act 2009 (Cth). Under s 311, a transfer of business occurs when the purchaser employs a vendor's employee within three months to do substantially the same work, and the transfer of business assets supplies the required connection between the two employers (s 311(3)). Where prior service is recognised, accrued annual leave travels with the employee (s 91). Under s 122, the vendor owes no redundancy pay to a worker who rejects a purchaser's offer on substantially similar terms that recognises prior service. Transferring staff should sign a fresh Fair Work compliant employment contract at completion. Pre-sale statements about turnover fall under s 18 of the Australian Consumer Law. An entire agreement clause does not exclude that liability, and a disclaimer helps only if, in context, it neutralises the representation (Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60). The Personal Property Securities Act 2009 (Cth) makes a PPSR search before exchange a basic step for any purchaser.

The classic scenario is the retirement sale: an owner who has run a cafe or plumbing business for fifteen years hands it to an employee, a competitor or a purchaser found through a broker. Goodwill is usually the main asset, so the restraint and handover period carry the deal. The mirror image is the first-time purchaser who agreed a price over coffee and now needs a sale of business agreement tying it to verified accounts, a stocktake and the landlord's consent.

Franchise resales come next, with the franchisor's consent as a condition and the Franchising Code of Conduct, now in the Competition and Consumer (Industry Codes—Franchising) Regulation 2024, adding its own disclosure steps. Restructures are often overlooked: a sole trader moving the business into a new Pty Ltd company is still making a sale that must be documented at arm's length.

Two edge cases deserve a mention. A vendor selling one division of a larger enterprise can still qualify for the going concern exemption if that part is capable of separate operation, provided the asset list is complete. Executors selling out of a deceased estate need limited warranties that reflect their authority under the grant of probate.

• The sale assets and excluded assets schedules list exactly what passes, from the business name and domain to phone numbers and customer databases. Cash at bank and debtors are excluded by default.
• The purchase price and apportionment clause splits the price between goodwill, equipment and stock. That split drives each party's tax position and any duty assessment.
• The GST clause records the going concern agreement in writing and adds a gross-up, so the purchaser pays any GST later assessed if a condition turns out to be unmet.
• The stocktake clause provides for a joint count the day before completion, valued at the lower of cost and net realisable value, with a cap so neither side faces an inflated figure.
• The conditions precedent cover landlord consent, finance, franchisor approval and licence transfers, each with a sunset date after which either party may terminate and recover the deposit.
• The employees clause identifies transferring staff, records whether service is recognised and credits the purchaser for accrued leave it takes over.
• The restraint of trade uses cascading periods and areas so a court can enforce the widest reasonable combination. For managers bound personally, it pairs with a separate restraint of trade deed for key employees.
• The settlement adjustments clause apportions rent, outgoings, utilities and customer deposits at the completion date.

New South Wales has charged no duty on non-land business assets since 1 July 2016, so the friction lies with the premises. Under s 39 of the Retail Leases Act 1994 (NSW), a landlord may refuse consent to an assignment only on limited grounds. Under ss 41 and 41A, the landlord must supply an updated disclosure statement within 14 days of the tenant's request, and the outgoing tenant must hand its assignor's disclosure statement to the incoming tenant at least seven days before assignment to be released from ongoing liability. Our lease assignment and landlord consent document handles that step. NSW is also the only state with a restraint statute, the Restraints of Trade Act 1976 (NSW), which lets a court read down an excessive restraint under s 4.

Victoria imposes one of the strictest disclosure rules in the country. Under s 52 of the Estate Agents Act 1980 (Vic), the vendor of a small business below the prescribed threshold for goodwill, plant, equipment and fittings must give the purchaser a signed Statement by a vendor of a small business, covering the last two accounting periods, before the purchaser becomes bound. Without that statement the purchaser can avoid the contract and recover the money paid. Where a retail lease is assigned, s 61 of the Retail Leases Act 2003 (Vic) governs consent and disclosure. Victoria charges no duty on business assets other than land, and continuity of long service leave on a transfer is preserved by the Long Service Leave Act 2018 (Vic).

Queensland still charges transfer duty under the Duties Act 2001 (Qld) on Queensland business assets, including goodwill, business names, intellectual property and statutory licences. Duty is calculated on the greater of the price and the asset value, on the GST-inclusive amount where GST applies, so losing going concern status costs twice. The agreement must be lodged with the Queensland Revenue Office for assessment. Accrued long service leave carries over under the Industrial Relations Act 2016 (Qld) when staff stay on.

Western Australia also levies duty on business assets, goodwill included, under the Duties Act 2008 (WA). The bigger trap is employment. Sole traders, partnerships and some trusts remain in the state system under the Industrial Relations Act 1979 (WA), so the Fair Work transfer rules may not apply at all, and leave continuity follows the Long Service Leave Act 1958 (WA).

You start by naming the parties exactly as they appear on the ABN register, including any trustee capacity, and by adding guarantors such as the directors of a vendor company. The form then asks for the state or territory where the business operates and adjusts the duty wording, lease mechanics and disclosure references to match. You then enter the price, its apportionment and the deposit with the stakeholder holding it.

Next come the conditions that apply to your deal, each with its own deadline. The employee section lets you list transferring staff and choose whether service is recognised, which drives the leave adjustment at settlement. Once the questionnaire is complete, the agreement is generated with every schedule populated, ready for signature. Other Australian business contract templates, such as a supply agreement with a key supplier, often complete the same transaction.

The most expensive error is a price that is silent on GST. A sale of business agreement stating the price is "plus GST if applicable" without a written going concern statement leaves both sides exposed, because the ATO reads the agreement as written, not as intended. Close behind is the vendor who closes for a week of painting before handover, because an enterprise that stops trading before the day of supply is no longer a going concern. Purchasers err on stock: "stock at valuation" invites a fight over obsolete items.

Employee entitlements are the next blind spot. A purchaser who recognises service without a matching price credit ends up funding years of leave accrued under the previous owner. Restraints fail the other way when a ten year, Australia wide clause is drafted for a single site bakery: no court will enforce it. And many purchasers forget that an ABN cannot be transferred. The purchaser must hold its own GST registration, or be required to hold one, by settlement, or the going concern exemption fails.