Closing a business properly involves more than deciding to stop trading. Registrations need to be cancelled in the right order, final obligations to staff and the ATO need to be met, and getting any of it wrong can leave you personally exposed even after the business itself no longer exists. Here is what the process actually looks like.
Finalise and lodge all outstanding activity statements and tax returns, and pay whatever is owing, before cancelling registrations. Cancelling too early is a genuine risk, since it can create gaps or complications in your obligations rather than closing them off cleanly. GST registration should be cancelled within 21 days of ceasing business activities, which can also flow on to related registrations like fuel tax credits. The ABN should be cancelled within 28 days of stopping all business activities. If you registered a business name with ASIC, that has to be cancelled separately through the ASIC business names portal. It is not cancelled automatically just because the ABN is.
A sole trader cancels their own ABN directly through the Australian Business Register. Any stock or business assets you keep or sell as part of closing down can trigger CGT on capital assets, or GST if you are still registered at the time of the sale, so it is worth working through the tax consequences of disposing of assets before you do it, not after.
Voluntary deregistration through ASIC requires meeting every one of these conditions: all members agree, the company is no longer carrying on business, its assets are worth less than $1,000, it has no outstanding liabilities, it is not party to any legal proceedings, and all ASIC fees are paid. If any of those are not true, particularly if there are still liabilities, voluntary deregistration is not available, and the company instead needs to go through a formal winding up or liquidation process with a liquidator, which is a more involved undertaking than a simple ASIC strike-off.
Closing a business with staff means paying out final wages plus all accrued but unused annual leave, and long service leave where it applies, continuing super guarantee obligations up to the date of cessation, and finalising Single Touch Payroll, including marking the finalisation indicator so employees can complete their own tax returns. Redundancy pay generally applies for employees with 12 months or more of service, but a small business employer, defined as fewer than 15 employees including the ones being made redundant, is exempt from the statutory redundancy pay requirement under the Fair Work Act. If super cannot be paid in full, pay what you can and lodge a superannuation guarantee charge statement within 28 days to limit further penalties.
Selling business assets on wind-up can trigger both CGT and GST, but the small business CGT concessions can still be available on that final sale, subject to the usual turnover or net asset value tests. Selling the whole business as a going concern can be GST-free, provided the buyer is GST-registered, both parties agree in writing that it is a going concern, you supply everything needed to keep operating, and you keep running the enterprise until settlement. Selling individual assets outside that structure is generally just a normal taxable supply.
Winding down a business and want to make sure the order of steps, and the tax consequences, are handled properly? Book a free call and we will map it out with you.
Forgetting to cancel the ABN or GST registration. This creates ongoing, unnecessary lodgment obligations and compliance letters for a business that no longer exists.
Assuming resignation removes director liability. Directors can remain personally exposed to Director Penalty Notices for unpaid PAYG withholding, GST and super guarantee charge even after resigning, or after the company is deregistered.
Not finalising STP. This blocks former employees from completing their own tax returns properly.
Attempting voluntary deregistration with liabilities still outstanding. This is not permitted, can be challenged, and can push the company toward a formal winding up instead.
Closing a business properly means finalising lodgments before cancelling registrations, meeting every final obligation to staff, and understanding the tax consequences of disposing of assets before the sale happens. Directors in particular should know that personal liability for certain tax debts can outlast both resignation and deregistration.
We help business owners close down properly, in the right order, with fixed fees agreed upfront. Book your free call here.
This article is general information only and does not take into account your personal circumstances. Please seek advice tailored to your situation before acting.
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