The Hidden Costs of Selling a Business in Australia

The headline price on a business sale feels real. You've agreed on a number, you've shaken hands, and you've started mentally spending it. What you haven't done, in most cases, is work out what that number becomes after tax, fees, adjustments, and the cost of getting there. Learn more about asset vs share sale tax implications.

As a rule of thumb: expect 25 to 40 percent of enterprise value to never reach your bank account. The exact figure depends on deal structure, your tax position, the size of your deal, and how prepared you were going in. For many owners, the gap between the number they agreed to and the cash they received is the biggest financial surprise of their life.

This article breaks down where it goes, specifically, and with real numbers.

The Gap Between Sale Price and What You Actually Receive

Enterprise value is what the buyer is paying for the business. It is not what you receive. Between those two figures sit capital gains tax, transaction fees, working capital adjustments, and the cost of your own professional advisers. Each of these is predictable. None of them are optional. And almost none of them are discussed upfront when a broker or buyer is pitching you on a headline number. Learn more about what business brokers actually charge.

The most common trap is anchoring on enterprise value as though it were a bank transfer. A $3M sale doesn't mean $3M in your account. After a typical CGT liability, legal and accounting fees, and a broker commission, a $3M deal might deliver $1.9M to $2.2M in actual proceeds, before any working capital adjustment or earnout shortfall.

Capital Gains Tax: The Biggest Deduction

For most owners selling a business they've built over years, CGT is the single largest deduction from proceeds. The structure of your sale determines exactly how it applies.

If you sell the shares of your company, you're selling a capital asset. The capital gain is the sale price minus your cost base (usually the original share capital). If you've held those shares for more than 12 months, you're entitled to the 50% CGT discount, meaning only half the gain is included in your assessable income. On a $3M capital gain, the discounted taxable gain is $1.5M. At the top marginal rate of 47%, that's approximately $705,000 in CGT. On a $3M gain. Even after the discount.

If you sell the assets of the business rather than the shares, each asset is treated separately. Goodwill, plant and equipment, intellectual property, each has its own CGT calculation. Asset sales are often preferred by buyers (they get a step-up in cost base); they may not be in your interest as a seller.

The Small Business CGT Concessions

The ATO provides four small business CGT concessions that can dramatically reduce or eliminate CGT for eligible sellers. These are:

• 15-year exemption: If you've owned the business asset for at least 15 years and are 55 or older (or permanently incapacitated), the entire gain may be tax-free.
• Active asset reduction: Reduces the capital gain by 50% for qualifying active business assets.
• Retirement exemption: Up to $500,000 of capital gains can be contributed to superannuation (or simply excluded if you're under 55 and use it for retirement purposes).
• Rollover concession: Allows you to defer the gain if you're reinvesting in another active asset.

The critical catch: these concessions require specific eligibility conditions. Your aggregated annual turnover must be below $2M, or your net assets (excluding your home and super) must be below $6M. Not every seller qualifies. Not every sale structure preserves eligibility. Tax structuring advice before the deal, not after, is essential.

Professional Fees (Legal, Accounting, Specialist)

A business sale requires lawyers, accountants, and often specialist tax advisers. These are not discretionary. The question is how much you spend, not whether you spend it.

Legal fees

For a straightforward transaction, a single owner, clean structure, limited IP, and a cooperative buyer, legal fees typically run $30,000 to $80,000. For more complex deals involving multiple shareholders, detailed warranty and indemnity negotiations, IP assignments, employee considerations, or a foreign buyer, fees of $80,000 to $200,000 or more are common. Warranty and indemnity insurance, increasingly standard in deals above $5M, adds to this.

Accounting and tax fees

Expect three categories of accounting cost. First, your own accountant's time on tax structuring advice and the EBITDA recast you'll need to present to buyers. Second, if a serious buyer requests a quality of earnings (QoE) report, a detailed independent review of your financial performance, that can cost $20,000 to $60,000, and in many transactions the seller is asked to contribute or bear the cost. Third, post-completion tax returns and any ATO correspondence that emerges from the transaction. Total accounting costs across a deal commonly run $15,000 to $50,000 for a small business.

Broker or M&A Fees

Most owners use either a business broker or an M&A adviser to run the sale process. The fee structures differ significantly.

Business brokers typically charge a success fee of 3% to 8% of enterprise value, with the higher percentage applying to smaller deals. On a $2M transaction, a broker fee of $60,000 to $160,000 is the realistic range. Some brokers charge a small upfront engagement fee; most are success-fee only. The incentive structure is simple: they want the deal to close, which is not always identical to wanting you to get the best deal.

M&A advisory firms typically charge a retainer (often $3,000 to $8,000 per month during the process) plus a success fee, usually in the range of 2% to 5% of transaction value. For deals above $5M, the Lehman formula or a modified version is sometimes used, where the percentage decreases as deal size increases. M&A firms typically provide more structured deal preparation, a wider buyer universe, and more rigorous negotiation support, which matters if your deal is complex or if you're trying to run a competitive process.

Neither fee structure is inherently better. The right choice depends on your deal size, your transaction complexity, and whether you're selling to a known buyer or running an open market process.

Working Capital Adjustments and Completion Accounts

This is the cost most owners don't see coming, and it catches even financially sophisticated sellers off guard.

When a buyer acquires a business, they expect to receive it with a normalised level of working capital, the cash tied up in debtors, stock, and creditors that allows the business to operate day-to-day without immediately needing to inject capital. This is called the working capital peg.

The peg is usually calculated as an average of the business's working capital over the preceding 12 to 24 months. If, in the lead-up to the sale, you've been running the business lean, collecting debtors quickly, stretching creditors, reducing stock levels, your working capital at settlement may fall below the peg. The result: either a price reduction or a cash injection at close to bring working capital up to the agreed level.

Separately, most transactions use completion accounts: the sale price is provisional at signing and is adjusted at close based on the actual balance sheet. Sellers typically expect the headline number they agreed to. The adjusted number, after working capital movements, debt-like items, and cash, is often lower. In deals without sophisticated accounting support, the completion accounts process regularly produces surprises that fall against the seller.

The practical implication: don't run the business lean in the 12 months before sale in an attempt to maximise cash extraction. The buyer will price it in, and you'll lose the adjustment at settlement.

The Cost of a Long Sale Process

Selling a business is a full-time distraction in a part-time disguise. The realistic timeframe for a well-run process, from preparation through to settlement, is 6 to 18 months. Most owners plan for 6 and experience 12 to 18.

During that period, you are simultaneously running a business and managing a transaction. Due diligence alone can require hundreds of hours of management time: producing documents, responding to information requests, attending management presentations, and negotiating terms. This is time not spent on customers, growth, or operations.

The financial cost of distraction is real and rarely modelled. Revenue can soften during a sale process if key relationships are neglected or if staff sense instability. EBITDA that underpins the agreed valuation can erode between signing and settlement, sometimes triggering a price renegotiation. In the worst cases, a buyer uses a deteriorating trading performance as leverage to renegotiate at the last moment, when the seller has limited appetite to walk away after 12 months of process.

There is also the emotional cost. A sale that drags, stalls at due diligence, or falls over entirely extracts something that doesn't appear on any spreadsheet. And it happens more often than sellers are told: a meaningful proportion of business sale processes that commence do not complete.

What You Can Control

Most of the costs described above are not avoidable. They are, however, manageable, and some of them are directly within your control if you plan ahead.

Sale structure. Whether you sell shares or assets has a significant impact on your tax outcome. This decision should be made with tax advice well before you enter a process, ideally 12 to 24 months ahead, because restructuring to optimise for the small business CGT concessions, or to ensure eligibility, takes time and cannot be done on the eve of a transaction.

The 12-month CGT clock. The 50% CGT discount requires assets to be held for more than 12 months. If you're close to that threshold, the timing of your sale matters. Rushing to market before the 12-month mark doubles your CGT liability. This is one of the simplest and highest-value pieces of timing to get right.

Working capital management pre-sale. Rather than optimising working capital in the final months before sale, aim for consistent, well-documented working capital levels across the 12 to 24 months before settlement. This makes the peg negotiation more predictable and reduces your exposure to an adverse completion accounts adjustment.

Choosing the right adviser fee structure. A broker charging 8% on a $2M deal might be motivated to get any deal over the line. An M&A firm on a retainer plus lower success fee might be better aligned with maximising your actual outcome. Neither is right in every situation, but understanding the incentive structure of whoever is advising you matters.

Preparing clean financials early. The single most effective thing most owners can do to reduce transaction costs and protect their price is to run clean, externally prepared accounts for three or more years before a sale. This reduces QoE risk, reduces legal negotiation over representations and warranties, and gives buyers confidence that your EBITDA is real, which directly protects your multiple.

The owners who walk away with the most are not necessarily the ones with the best businesses. They're the ones who understood the transaction before they entered it.