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 Sell a Cafe - Changes to Lending Criteria

How to Sell a Cafe – Changes to Lending Criteria

I wanted to make you aware of some changes that we’ve noticed recently with the lending criteria and the way that banks are looking at small business finance in particular with business loans for cafes and food businesses.

These changes could affect the sale of your cafe in the later stages which is naturally something that we want to try and avoid.

With this in mind, we’re going to change the way that we’re working and the way that we are preparing our clients’ businesses for sale and I wanted to give you the heads up quickly so that you’ve got the opportunity to do the same.

We have become aware of this change through a client of ours who’s got a really good buyer lined up. This person has industry experience, they have got cash in the bank, they’ve got good equity in their property and they have made a solid offer.

On paper these guys are ticking all of the boxes, they are the kind of buyer that you wish there was more of.

The deal has gone really smoothly. up until the point that the bank have looked in more detail about the lease.

The lease is a five by five, there are four years gone, so there’s one plus five left which in terms of return on investment and for the level of the deal itself is quite reasonable.

The buyers had previously spoken with their finance broker about the lease term and he saw no problem with it at all.
When the broker submitted the paperwork to the bank however there now seems to be a shift in the way that they are now looking at the remaining term before the option.

Because there is only a relatively short period of time left on the lease before the time that option is due to be exercised the bank has now refused to lend on that business.

 

It now appears that the time frame that you need to focus on is not the just the overall term but also the period of time remaining before the option kicks in.
If you’ve got a business that you’re looking to sell and, that someone is going to need finance for, you should be aware of this and prepare accordingly.

 

By preparing thoroughly you can overcome the problem before it arises which is really what good exit planning is all about.
Hopefully that’s given you a little bit of an insight into an extra something that’s worth taking into account as you start preparing your cafe for sale and maybe that will be one thing that helps you to get your deal across the line a little quicker.

I wish you all the best with the sale of you business and please feel free to let us know if you have any questions at all.

If you have not already found our Exit Planning For Café Owners Facebook Group why not join us here

https://bit.ly/2CtobUa

 

If you would like to learn more about preparing your cafe for sale then why not book in a call with us. On this 45 min call we will cover the following with you:

• What the current market value of your cafe might be.
• The steps you need to take to prepare for the sale.
• What the market is like at the moment.
• How to make sure that your cafe stands the best possible chance of selling.

 

There is no charge for this call and there is no obligation. At the end of the call if we think that we can help you we will let you know about how we work and, if we don’t think we can help we will give you some advice about alternative options.

 

Either way you will come off of the call with a much clearer idea about the potential value of your business and of what you need to do next to achieve a sale.

 

Click on the link below to book in a time that suits you best, once you have selected a time you will be taken to a form which has around 10 questions about your business that will help us to get a better understanding and save time on the call.

 

Book your call here
https://www.gsebusinessconsultants.com.au/apply