Australia guides

What should I check before buying a business in Australia?

Due diligence means independently checking three things before you sign: the financial records, the business operations, and the legal documents. business.gov.au tells buyers to examine three to five years of financials, confirm licences and permits are current, establish whether the landlord will transfer the lease, and check whether debts are registered against the assets on the Personal Property Securities Register. Several of the checks cost almost nothing and you can run them yourself — an ABN Lookup search, an ASIC companies register search, and a $2 PPSR search. The tax, duty and employment consequences of a purchase depend on your circumstances and your state, so use an accountant and a solicitor for those rather than a checklist.

By the bizflip team · Published 2 September 2026 · Facts checked 2 September 2026 · Sources listed below

Due diligence is the part of buying a business where you stop taking the seller's word for things. business.gov.au puts it plainly: gather as much information as you can before you sign the contract, and review the financial records, the business operations and the legal documents, because that is what lets you identify and manage the risks you are taking on. What follows adds the Australian-specific checks — registers, licences, duty, employee entitlements — that a generic checklist misses.

The financials, independently

The key word in business.gov.au's guidance is independently: collect and check the financial information yourself rather than accepting a summary. Examine the past three to five years of:

• tax returns and business activity statements;
• records of accounts receivable and payable;
• balance sheets;
• profit and loss records;
• cash flow statements;
• sales records.

Two questions run underneath all of them. Does the reported profit reconcile to the tax returns and the bank statements, or only to a spreadsheet the seller prepared? And how much of the quoted earnings depends on the seller personally — their relationships, their trade licence, their unpaid hours? An earnings figure that includes an owner working sixty hours a week for no wage is not one you inherit unless you work those hours too.

Ask what share of revenue the largest customers represent, which contracts are transferable, and what debts exist — including superannuation and tax, which Business Queensland notes buyers want to know about specifically.

The registers you can search yourself

ASIC's guidance on checking a business is genuine applies directly, and these searches are cheap enough that there is no reason to skip any of them.

The PPSR search is the one buyers most often miss. It is a public noticeboard of security interests in personal property — cars, company assets, used goods, intellectual property, but not land or fixtures — and business.gov.au directs buyers to check for debts owing on assets registered there. Buying an encumbered asset without clearing the security interest first is how buyers pay for equipment twice.

ASIC's own caution is worth carrying: appearing on a government register does not guarantee a business is trustworthy. Registers rule things out, not in.

The lease, the licences and the contracts

• The lease. Will the landlord agree to transfer the lease into your name, or must you negotiate a new one? For retail or commercial premises this can decide whether the business is worth buying at all, and consent usually carries a process and a cost. Retail lease rules differ by state, so have a solicitor read the lease.
• Licences and permits. Does the business hold everything it needs, and is each one current? Check what your activity and location require through the Australian Business Licence and Information Service rather than assuming the seller's set is complete. business.gov.au warns that licence transfers can take up to 12 months — a settlement-timing problem as much as a compliance one.
• Supplier and customer agreements. Are there outstanding agreements with suppliers, and can they be assigned to you?
• Plant, equipment and fixtures. What does the business own, what condition is it in, and is it licensed where it needs to be?
• Inventory. Is the stock on hand included, what state is it in, and how much is obsolete?
• Liabilities. Outstanding debts, and refunds and warranties still on foot that you would inherit.
• Intellectual property. Whether trade marks, domain names and the customer database are actually part of what is being sold.

The employees

If the purchase is a transfer of business under the Fair Work Act, you must recognise a transferring employee's service with the old employer for most entitlements, including sick and carer's leave, flexible working requests and parental leave. Some can be treated differently where the new employer is not an associated entity of the old one — redundancy, annual leave, long service leave, unfair dismissal and notice of termination each have their own rules, and some require written notice before the new employment starts.

Price this during due diligence rather than discovering it afterwards. Accrued leave is a real liability, and whether it transfers to you or is paid out by the seller changes what you should be willing to pay. You will also need the employment records: the old employer has to give them to the new employer for transferring employees, and the new employer has to ask for records for anyone who becomes their employee within three months of the sale. Employers must keep time and wages records for seven years, so incomplete records are themselves a finding.

Tax, GST and duty

Three separate questions, all needing your accountant and solicitor rather than a web page.

• GST. No GST is payable on the sale of a going concern if certain conditions are met, set out in the ATO's ruling GSTR 2002/5. Whether your purchase qualifies affects the cash you need at settlement, so settle it in the contract.
• Duty. This is state-based and the position varies. Revenue NSW, for instance, states that the buyer — not the seller — pays transfer duty, that it applies where the sale includes land or an interest in land such as the assignment of a lease, and that goodwill, intellectual property, statutory licences and debtor receivables are not dutiable property in NSW. Other states treat business assets differently. Check with your solicitor or state revenue office before you budget.
• Structure. Buying the assets and buying the shares in the company that owns them are different transactions with different risk and different tax outcomes. An asset purchase generally leaves the company's history behind; a share purchase does not.

If it is a franchise

The Franchising Code of Conduct gives you rights that do not exist in an ordinary business sale. A franchisor must give a prospective franchisee the franchise agreement, a copy of the Franchising Code and the disclosure document at least 14 days before the agreement is entered into, along with any leasing documents and other agreements to be signed. Franchisors must also tell prospective franchisees to get independent advice — usually from a lawyer, a business adviser and an accountant.

There is also a cooling-off right: a franchisee may terminate a franchise agreement within 14 days of entering into it, and where money has been paid the franchisor must return it within 14 days of being notified, less reasonable termination expenses if the agreement provides for them. Use the 14 days before signing to read the disclosure document rather than treating the period as a formality.

Disclosure the seller may owe you

In some states a vendor statement is compulsory below a price threshold, and it is a due diligence document in its own right. In Victoria, a small business sold at up to $450,000 requires a section 52 statement setting out financial performance over the last two years plus the current year to the most recent quarter — and if it is not provided, the contract can be voided. In South Australia, a business sold for less than $300,000 excluding GST requires a Form 2 vendor's statement. Ask your solicitor what applies where you are buying.

The personal information you are buying

If a customer database is part of the purchase, the OAIC treats selling assets that include personal information as trading in personal information, and the Privacy Act covers any organisation that does so regardless of turnover. During due diligence the seller should de-identify employee and customer records where the question can be answered without names, so expect redacted material and do not press for identified records you do not need.

What due diligence cannot tell you

Records show what has happened, not what will. They will not tell you whether the biggest customer stays after the founder leaves, or whether the seller's personal reputation was the product. Talk to existing customers, employees and neighbouring business owners, as business.gov.au suggests, and treat what you learn as evidence.

Then price what you found. Every unresolved item is either a reduction in price, a condition in the contract, a warranty from the seller, or a reason to walk. Nothing here is legal, tax or financial advice; the point of it is to arrive at your adviser's office with the right questions and the documents in hand. Our Australian guides cover the rest of the process, and businesses currently listed show the disclosure to expect before you sign.

Sources

Every load-bearing claim in this guide, and where it comes from:

• business.gov.au on due diligence: "Gather as much information you can on the business you're interested in before you sign the contract. It's essential that you review all: financial records, business operations, legal documents"; "You need to independently collect and check the financial information about the business. Make sure you examine the past three to five years of financials including: tax returns, business activity statements (BAS), records of accounts receivable and payable, balance sheets, profit and loss records, cash flow statements, sales records"; and the checklist items on licences and permits ("Are they up-to-date?"), contracts and leases ("Will the landlord agree to the transfer of the lease into your name? Will you have to negotiate a new lease?"), outstanding supplier agreements, status of plant, equipment and fixtures, assets and intellectual property, inventory, and liabilities including "debts owing on assets that are registered on the Personal Property Securities Register". It also suggests talking "to existing customers, employees and neighbouring business owners". — business.gov.au (Australian Government)
• "License transfers can take up to 12 months, so it's important to plan for this early in the sale process." — business.gov.au (Australian Government)
• ASIC on checking another business: use ABN Lookup to check the business is registered and its ABN or ACN matches; warning signs include a name or ABN not listed or linked to a different entity. Use the companies register to "check that it is registered and solvent before dealing with it" and "check who the company directors are"; "You can also use the companies register to check whether a company is under external administration. This usually means it is insolvent"; warning signs include "The company is listed as deregistered" and "The company is listed as under external administration ('EXAD')". A company extract gives "the names of the current company directors" and "how long these directors have been with the company", with warning signs including frequent director changes. You can also "search to see if they are banned or disqualified from managing a company" and "search the Australian Financial Security Authority's bankruptcy register". "Important: If a business, or business name, is listed on a government register, that does not guarantee that the business is trustworthy." — ASIC
• "The PPSR is the official government register of security interests in personal property — these are debts or other obligations that are secured by personal property"; "Personal property includes things like cars, company assets, boats, used goods and intellectual property; it doesn't include land or fixtures"; "People can search the PPSR to see if someone has registered a security interest over personal property (which they may want to do before buying property or lending money to someone)." — Personal Property Securities Register (Australian Financial Security Authority)
• PPSR fee schedule: "Do a search" costs $2.00 online and $7.00 through the contact centre; PPSR fees are not subject to GST. — Personal Property Securities Register (Australian Financial Security Authority)
• Fair Work Ombudsman: "When there is a transfer of business a new employer has to recognise an employee's service with the old employer when working out most of their entitlements, including: sick and carer's leave[,] requests for flexible working arrangements[,] parental leave." Entitlements the new employer might not have to recognise where the employers are not associated entities include "redundancy[,] annual leave[,] long service leave[,] unfair dismissal[,] notice of termination", each with its own conditions, including written notice before the new employment starts for unfair dismissal service. — Fair Work Ombudsman
• "Employers have to keep time and wages records for 7 years"; "Where there has been a transfer of business, the old employer has to give the new employer records of any transferring employee. The new employer also has to ask for employment records from the old employer for any transferring employee who becomes an employee within three months of the sale." — Fair Work Ombudsman
• ATO: "No GST is payable on the sale of a going concern if certain conditions are met", with the conditions set out in GSTR 2002/5 Goods and services tax: when is a supply of a going concern GST free. — Australian Taxation Office
• Revenue NSW: "If you buy a business in New South Wales (NSW), you must pay transfer duty when the sale includes land or an interest in land, such as a lease"; "The buyer is responsible for paying the duty, not the seller"; dutiable property includes land, interests in land such as commercial or retail leases including the assignment of an existing lease, fixtures, and goods in certain circumstances; "In NSW you do not have to pay transfer duty on the following business assets: Goodwill... Intellectual property such as trademarks, copyright, patents, and domain names. Statutory licences... Debtor receivables". Page last updated 31 August 2026. — Revenue NSW
• ACCC: a franchisor must give a prospective franchisee the franchise agreement, a copy of the Franchising Code of Conduct and the disclosure document "at least 14 days before entering into a franchise agreement", along with applicable leasing agreements and other agreements that must be entered into; and "Franchisors need to tell prospective franchisees to get independent advice. This is usually from a lawyer, business adviser and accountant." — ACCC (Australian Competition and Consumer Commission)
• ACCC: "A franchisee may terminate a franchise agreement within 14 days of entering into the agreement (the cooling-off period)"; "If a franchisee pays money to the franchisor and then changes their mind about a franchise agreement during the cooling-off period, the franchisor must return the money within 14 days of being notified by the franchisee", less reasonable termination expenses where the agreement provides for them. — ACCC (Australian Competition and Consumer Commission)
• Consumer Affairs Victoria: the section 52 statement "is required for the sale of a small business at a price up to $450,000", "provides a due diligence guide for a buyer and sets out the financial performance of the business over the last two years" plus, from 20 May 2018, "the financial performance for the current financial year up to the most recent quarter"; "If the statement is not provided to the purchaser, the contract can be voided." — Consumer Affairs Victoria
• "Under the Land and Business (Sale and Conveyancing) Act 1994 (SA) anyone selling a business for less than $300 000 (exclusive of GST) must give the purchaser a Form 2"; it "states the gross income, purchases and operating expenses from which the net profit of the business for the last twelve months can be calculated". — Legal Services Commission of South Australia
• OAIC: "A business which sells assets, including personal information held in their customer database, is 'trading in personal information'"; "The Privacy Act covers any organisation trading in personal information"; a vendor "should consider whether the information can be de-identified" and should avoid providing other employees' records unless de-identified or consented to. — Office of the Australian Information Commissioner
• Business Queensland notes buyers "will be particularly interested to know: what debts the business has (including, for example, superannuation and tax)[,] the operating costs[,] if the business operates at a net profit or a loss", and lists the financial, operational and legal documents a seller should prepare for a buyer's due diligence. — Business Queensland (Queensland Government)
• The Australian Business Licence and Information Service is the government service for identifying the licences, permits and registrations required for a business activity and location. — ABLIS (Australian Government)

Ready for your own number? The valuation calculator is free and ungated, and its methodology is public.