Do I Need To Pay GST When I Sell My Cafe?

Do I Need To Pay GST When I Sell My Cafe?

 

 

 

Do I need to pay GST when I sell my Cafe?

 

The question about whether or not GST is payable on the sale of a cafe is something that seems to confuse many people and, it is certainly something that you should look into before you sell.

 

The short answer to this question is no (providing that you meet certain criteria outlined by the ATO).

 

The term used commonly in this ruling is “supply of a going concern” simply put this means that the business is still trading.

 

The ATO make it quite clear that if the business is being sold as a going concern then there will be no GST payable on the transaction.

 

What determines if a business is being sold as a going concern?

 

In order for the business sale to be deemed as a going concern then you must make sure that:

 

  • The business continues to operate up until and including the date of supply (settlement)
  • All of the equipment required to continue the operation is supplied as part of the sale.

 

Most cafe sales will fall into this category. An example of an exception might be a sale of fixtures and fittings in a shop which is no longer trading.

 

If you are selling your cafe as an operational business then the sale will most likely be considered “a going concern”.

 

What else needs to be considered to ensure you don’t have to pay GST on your sale?

 

In addition to making sure you are selling as a going concern you will need to make sure that both you and the person buying the business have agreed that the the business is being sold as a going concern.

 

This is generally taken care of in the contract of sale, this is quite a standard clause in most contacts and looks something like this:

 

By you both signing this contract you will have effectively agreed that the sale is as “a going concern”

 

The buyer must also be registered for GST

 

Whoever is buying your business must also be registered for GST in order for the transaction to be GST exempt.

 

If you can meet all of the criteria above then your sale will likely not include GST.

 

Where can I get more info?

 

You can read more about the ATO guidelines here

https://www.ato.gov.au/General/ATO-advice-and-guidance/In-detail/Private-rulings/Supporting-documents/GST/Sale-of-a-business-as-a-going-concern/

 

Details about the tax ruling can be found here

 

http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR20025/NAT/ATO/00001

 

Speak to your accountant and double check your personal situation and if you are still not sure then the ATO are very helpful in explaining this.

Contact the ATO directly on 13 28 61

 

I hope this helps make the understanding of GST on cafe sales a bit clearer, if you need any help or advice feel free to get in touch at any time.

How to Transfer a Liquor Licence NSW

How to Transfer a Liquor Licence NSW

 

 

Transferring your liquor license is not a lengthy or complicated process, the steps outlined below walk you through what you need to do.

 

 

Transfer of your liquor licence

 

You can transfer a liquor licence when you buy or sell a business. This allows the new business owner to trade under the existing licence.

Liquor & Gaming NSW allow a business to continue operating while it considers a licence transfer.  Provisional approval is usually given and the official confirmation of the transfer with follow later.

The licence transfer does not become effective until Liquor & Gaming NSW give provisional approval.

There are 4 ways you can transfer a licence but transferring with consent of the outgoing licensee is the most common.

Transfer your licence with consent of outgoing licensee

This is a straightforward process for both individuals and corporations.
Transferring a liquor licence this way takes two steps:

• provisional approval
• confirmation.

How to apply for provisional approval

You must give Liquor & Gaming NSW the following inforamtion:

• Evidence of Responsible Service of Alcohol (RSA) qualifications.

• If required, evidence of Responsible Conduct of Gambling (RCG) qualification.
(not relevant to cafes)

• If the liquor licence includes gaming machine entitlements, you will also need to provide a direct debit form and data monitoring forms to show there are no outstanding payments. (not relevant to cafes)

• A copy of your NSW National Police Certificate that is less than 3 months old.

• Corporate licensees must provide a current ASIC extract showing directors and officeholders. You can buy this document through the ASIC website

Liquor & Gaming NSW usually confirm your licence transfer within 60 days.

Fees

Please note that fees vary depending on the type of licence you want to transfer.

Online transfers

To complete the online form you will need to download and complete by clicking the button below, once you have filled it out you can submit it using the instructions on the form.

How to Transfer a Liquor Licence NSW
What to ask your solicitor when selling a cafe

What to ask your solicitor when selling a cafe

 

 

When talking to your solicitor one of the most important things to review is the current lease of the business.

 

In most cases we don’t tend to look at this document after we’ve bought the business but during the sale process it’s important to go through this again in detail at it can have a huge impact on the valuation and the ability to sell, I always suggest that my clients make the solicitors meeting one of the first in the process.

 

If you do find it there is an issue with the lease then this can take some time to sort out so its always better to get this checked out early on.

 

Key questions to ask.

 

A few of the key points to review with your solicitor during this meeting are

 

How much time is left on the current lease and do you feel that buyer’s will feel it is long enough in relation to the price that you’re asking for the business?

 

• If you’re not already sure check how often the rent is due to increase and how this is calculated. This is a commonly asked in the early stages it’s good to answer it in the initial marketing.

 

• What does the lease say about assignment?

This is the transfer of the lease from yourself to the person buying the business.

Most leases will state that all costs relating to the assignments to be paid by the lessee (you) and it’s a good ideas at this stage to make sure your solicitor pushes for you to only pay 50%.

 

By giving your solicitor the heads up about this early on you can make sure that this agreement to pay 50/50 is drawn into the contract of sale and its an easy way to save yourself a good chunk of money on legal fees.

I’ve always advised my clients to do this and it’s very rarely gets questioned by the purchaser’s solicitor but, it is important that you instruct your solicitor to do this it can be missed.

 

• How much are they going to charge you?

I’ve noticed that solicitors fees of my clients seem to vary greatly for very similar transaction.

It’s a good idea at this stage to get an indication of what the solicitor is going to charge you in relation to dealing with preparation of the contract of sale and helping deal with the assignment of the lease

 

Understanding what your legal fees are likely to be is important when you work out the sale proceeds you will be left with after all of your costs.

 

If you feel that their costs are too high don’t be afraid to question them or seek other quotes, a lawyer working for you on this does not necessarily have to have any history with you.

 

I work with a couple of lawyers in Sydney who specialise purely in business sale transactions so if you need a second opinion feel free to let me know and I’ll happily pass on their details.

 

Also, just so you know I don’t take any kickbacks or referral fees from anybody that I work with and I only recommend people who I know can genuinely help the people that I work with.

 

I hope this helps, feel free to get in touch if you have any questions about selling your café.

 

 

 

 

 

 

What to ask your solicitor when selling a cafe

How to Sell a Café – Financial Preparation

How to Sell a Café – Financial Preparation

How to Sell a Café – Financial Preparation

 

One of best things that you can do in order to prepare your café for sale is to have your financials prepared and ready to provide to qualified buyers.

 

Having your financials prepared basically means having up to date information that proves the amount of sales, expenses and profitability of the business.

 

When your financial information is prepared and ready to go it helps with the business sale in several different ways but, most importantly it will save you, the business owner a great amount of time.

 

In worst cases if this information is not properly prepared (and accurate) then it can cause a sale to stall and even fall through.

 

If you have worked hard to market and advertise your café and you have generated some interest you need to make sure you keep those people interested and give them very little reason to pull out or try and negotiate the price downwards.

 

Selling a cafe has a lot to do with reducing risk in the eyes of the buyer and if you do not have things like your financials in order the alarm bells will start ringing.
Many of the people that consider buying your café may not have any experience in the industry and may not be aware of how many café businesses operate (I think you know what I am talking about here).

 

Your job is to demonstrate the income that they can expect from the business and, if your BAS statements and financial accounts can’t prove this 100% then you need to think strategically.

 

One way that you can get around this is to use a tracking sheet in an application like Excel. This kind of spreadsheet can be completed in a matter of minutes each day and can be a very useful during the sale process.

 

How to Sell A Cafe - Financial Prearation

 

One of the key things to remember with this system is that you need to back up the information entered onto the spreadsheet. For example it’s no good just putting down that you took $1200 on the 14th of August unless you have kept a Z report or a POS record which verifies that.

 

The same applies with your invoices and staff payments, keep a separate record and make sure that everything matches with your spreadsheet.
I know what you are thinking and can almost hear the groans but trust me, spending a few minutes each day entering this information and filing the matching paperwork will pay dividends.

This simple system will help you to clearly demonstrate the value of your business and at the same time speed up the sale process by giving buyers less things to ask questions about.
The earlier you can start this the better, the more information that you can give to buyers like this the easier it’s going to be to get them over the line.

 

When to give out this information.

Naturally this information is very confidential and should not be shared with anyone unless you are confident that they are serious.

 

With my brokerage clients I take a goodwill deposit of 5% before this kind of information is shared. After this deposit is paid we grant the buyer a two week period of exclusivity where they can carry out their due diligence.

 

If you are selling on your own then you can still get a signed confidentiality agreement, (something that we cover in out Six Weeks to Sale program) which helps to ensure that any information provided is treated with confidentiality.

 

If you have any objection from somebody about signing a simple agreement like this then that is normally a sign that they are not a serious buyer.

 

When you get to the point that you consider sharing this information you will probably have had several interactions with the person interested and you should feel comfortable providing all the details required for them to confirm the figures you have quoted in the marketing of the business.

 

 

I hope this has given you a couple of ideas about how you can sell your café with more ease, it does not have to be a long or stressful process you just need to be prepared.

 

If you would like a copy of the spreadsheet I mentioned above just type “Spreadsheet” in the comments below and I will send you a copy.

Exit Planning For Cafe Owners - Lease Considerations

Exit Planning For Cafe Owners – Lease Considerations

 

 

 

The Sweet Spot – Timing the Sale of Your Business

 

This post marks the first in a new series discussing the ways in which you can add value to your cafe and maximise the return when you sell. This article discusses what an important part of the valuation process the lease is and, how it can affect how saleable your cafe is when you go to market.

 

 

All retail food businesses have a built-in clock. For some this clock sets the time frame for business growth and for others it is a ticking time-bomb. The realities of the retail food game are harsh. A profitable business on a poor lease, is a still a poor business. In this article, we explore the relationship between the length of the lease and the sale of your business.

 

There are two closely related moving parts. The first, is the impact your lease has on the value of your business and secondly, the sweet spot – when your business stands the best chance of achieving maximum sale price relative to the time left on the clock.

 

So we start with a simple reality.

A profitable business with a long lease can be sold for more than a profitable business with a short lease.

No two businesses are alike, so what value drivers are common to most successful business sales?

Answer: Profit and lease years remaining.

We will explore profitability later on in this series, here the focus is on lease years remaining, and more particularly the valuation multiples that apply to food businesses.

 

If you have come along to one of my workshops, or heard me talk at trade shows or industry events, you would know that establishing the correct profit (earnings) multiple for your business is crucial in planning the sale.

 

There are a host of value drivers and detractors that depend on the subjective circumstances of your business. The days, hours and intensity of operation, the relative skill (or not) required to produce menu items, the location and demographic are all examples of the factors you must carefully consider and balance.

 

Say, for example, having found that balance with your business advisors and accountants you arrive at a profit multiple of 2.6. That means you could expect a buyer to pay 2.6 years’ worth of profit for your business.

How many lease years need to be left on the clock to justify the buyer paying you 2.6 years of profit upfront ?

If you were buying would you pay 2.6 years of profit with 2, 4 or 6 years remaining ?

What if the landlord refuses to extend the lease ?

 

Take-Aways

This brings home the plain truth – you must plan to sell your business before you sign the lease. Opt for a lease with a baked-in exit strategy that coincides with sales growth, projected profitability and the multiple you need to make the risk worth it. Yes, you need to value your business before you build it.

Knowing the multiple means you can make strong decisions early, rejecting sites, offers and landlords that drive the multiple down. Remember apart from a bunch of second hand equipment, all you really have to sell is the opportunity to make profit from a site for a fixed number of years. The more years left on the clock, the higher the price.

 

© Peter Panagiotopoulos 2017 @cafelawyer

 

Exit Planning For Cafe Owners – Lease Considerations

 

 

Peter Panagiotopoulos of CRAFT Legal is a leading lease and business sale negotiator who has protected the rights of food and beverage retailers for over two decades.

 

Known within the industry as the cafelawyer®, Peter has personally choreographed the sale of hundreds of small businesses and has dedicated his legal career to giving businesses the tools and confidence to make the right business-building decisions.

 

 

Mobile              0414 257 298

 

Web                 www.craftlegal.com.au

 

Twitter              @cafelawyer https://twitter.com/cafelawyer

 

Blog                 https://cafelawyer.wordpress.com/