What is the Difference Between an Asset Sale and a Share Sale for a Business in South Australia?

When it comes time to sell or buy a business in South Australia, one of the first questions is how the transaction should be structured: as an asset sale or a share sale. Each approach has significant implications for ownership, liabilities, tax, and the future of the business.

Understanding the difference is essential for small business owners, families, and entrepreneurs planning to buy or sell in Adelaide and beyond.

What is an Asset Sale?

In an asset sale, the buyer purchases selected assets of the business. These can include:

• Plant, equipment and stock

• Intellectual property (trademarks, trade names, domain names)

• Goodwill and customer lists

• Leasehold interests or freehold property

  
  

The business entity itself (usually the company or trust) remains with the seller. Importantly, the buyer generally does not take on the seller’s liabilities unless agreed.

What is a Share Sale?

In a share sale, the buyer acquires the company’s shares (or units in a trust). This means the buyer steps into the shoes of the current owner and takes over everything the company owns and owes.

• All assets, contracts and licences remain in place

• All liabilities (including debts, tax obligations, employee entitlements) transfer with the company

• The business continues operating under the same legal entity, but with a new owner

  
  

Key Differences Between Asset and Share Sales

Aspect	Asset Sale	Share Sale
Ownership	Buyer takes specific assets	Buyer takes entire company
Liabilities	Stay with seller (unless included)	Transfer to buyer
Employees	Must be offered employment; entitlements negotiated	Automatically remain with company
Contracts	May need to be re-assigned or novated	Usually continue without change
Tax	Potential GST, CGT, and stamp duty issues on assets	No GST (sale of shares), CGT applies to seller
Complexity	Simpler for buyers to exclude risks	May be simpler for seller; less disruption to business

Practical Examples

• Small café in Adelaide: Often sold as an asset sale – buyer wants the equipment, name, and goodwill but not the seller’s old debts.

• Established incorporated company: A share sale may be preferred where contracts, licences, and brand reputation need to remain untouched.

Advantages and Risks

For Sellers

• Asset sale: Can retain liabilities but may face higher tax and contract transfer issues.

• Share sale: Cleaner exit; but buyer may reduce price to offset risks of inheriting liabilities.

For Buyers

• Asset sale: Safer, as unwanted liabilities can be excluded.

• Share sale: Preserves business continuity; but requires thorough due diligence to uncover hidden debts.

Tax and Legal Considerations in South Australia

• Capital Gains Tax (CGT): Applies in both structures but calculated differently.

• Goods and Services Tax (GST): Often applies to asset sales unless structured as a “going concern”. Share sales are not subject to GST.

• Stamp Duty: May apply to certain asset transfers (e.g. real property, motor vehicles).

• Employment Law: Under the Fair Work Act, employee entitlements may transfer differently depending on sale type.

Because the implications are complex, professional advice is essential to avoid unexpected costs.

FAQs

What is the simplest way to sell a business in SA?

There is no one-size-fits-all answer. Smaller businesses often use asset sales, while larger companies may prefer share sales.

Do buyers take on debts in an asset sale?

Generally no – unless debts are specifically included in the agreement.

Are employees automatically transferred in an asset sale?

No. Employees must be offered employment by the buyer, and accrued entitlements may need to be addressed.

Is GST payable on a share sale?

No. GST does not apply to the transfer of shares.

Which is better for small business owners?

Buyers usually prefer asset sales to minimise risk, while sellers may prefer share sales for a cleaner exit. Legal advice is crucial to decide which suits your circumstances.

Conclusion: Get Legal Advice Before Deciding

The choice between an asset sale and a share sale can make a significant difference to tax, liability, employees, and the overall success of the transaction.

At Craig McKay Legal, we help individuals, families, and small business owners across Adelaide and South Australia navigate these decisions with confidence.

Contact us today to discuss your business sale or purchase and ensure you get the right advice for your situation. Whether you are buying or selling a business, speak with us about putting in place the necessary contractual documents to ensure that the transaction occurs seamlessly and your rights are protected throughout. Contact us if you are selling your business for a no obligation teleconsult.

If you would like a cost estimate for advice upon any Businsess Sale Agreement you have been provided, please email us a copy to obtain your fixed price cost estimate. 

This article is for general information only and is not a substitute for legal advice. For advice specific to your situation, please contact our office.