How will tax affect the sale of your business?
An owner’s exit strategy should be centred on maximising after-tax cash flow, both in the short term and long term. There is a logical sequence to contemplate in this process and it does begin with a valuation of the business.
Once the base business value and owner’s goals are established, some of the many variables to contemplate include:
- Franking credits which may allow for ongoing tax-advantaged income to owners prior to or post-sale
- Small business Capital Gains Tax (CGT) concessions which depending on business value may allow for favourable tax treatment on exit
- CGT rollover relief where the sale involves an exchange of scrip in another entity
- Sale structure is also critical with the sale prepared to give effect to the above concessional or tax-advantaged outcomes. This may involve some intermediate tax structuring overlays
- A progressive exit versus an outright sale may deliver an effective combination of both adding value to the business and minimising tax payable through the process. An employee share ownership plan may be implemented to facilitate a progressive sell down, which alongside enhancing employee engagement also minimises key person exit risks in parallel with driving profitability and end value
The Succession Plus Stage 1 Insights Report gathers the data required to formulate this strategy, develop a baseline valuation along with owners objectives and timeframes to work through the tax implications and finalise an exit plan. Combined with our Strategic Advisory Service and tax advisor input, the sale process will logically evolve into a program of activities which maximises your after-tax cash flow.