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
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.
I am very disappointed with Paul’s respond to my inquiry on a business that was listed by him. Although i had a lot of experience in running a cafe in the past he would not give me details on a cafe listed by him after signing the confidentiality agreement.
I am sorry that you feel that way Dilan. From the conversation that we had after you completed the confidentiality agreement you may remember that I mentioned the landlord of this property will only grant a lease to somebody with equal or greater experience than the current tenant (something which is increasingly common).
During that conversation you told me about your experience in running a retail franchise, you did not give me an indication that you had experience in running a business anything like the one that you inquired about, you also told me that you were not trained as a cook or chef.
My client has given me very clear instructions about the type of experience that an incoming tenant will need and, from our conversation (and as explained afterwards) the experience that you told me about will not be enough for this particular business.
With that in mind you must appreciate that I am not prepared to send out confidential information about my clients business when it is clear that the experience that you described to me will not meet the criteria of the landlord.
Again I am sorry that you feel disappointed with my response but I am not prepared to send out information about business name and location without first qualifying that a buyer is suitable, this not only compromises confidentiality but would ultimately have wasted your time as well.
I wish you all the best with finding a new business and sorry that I cannot help you on this occasion.