If your sale of business includes the transfer of both equipment and goodwill, the sale price will need to be apportioned between equipment and goodwill. There are tax implications of this apportionment and as such it is best to seek advice from your Accountant prior to agreeing to an apportionment in the sale of business contract.
Business Tax Implications
The tax implications differ depending upon whether you are the vendor or purchaser. This is why sometimes the parties agree to leave the sale of business contract silent as to apportionment, as an agreement cannot be reached. It is however, best to avoid this position as it could trigger an audit from the Australian Taxation Office.
Typically, a vendor will seek to attribute a higher value to the goodwill apportionment as there may be CGT concessions available, whereas a purchaser will seek to attribute a higher value to the equipment apportionment, as this may allow for greater deductions for depreciation.
Ultimately, the price should be apportioned to equipment based on the fair market value of the equipment at completion, that can be justified if either party is audited.
