Selling the business to your children is still a sale, and it needs to be run like one

Handing the business to a son or daughter feels like a family matter, but to the tax office, the duty office, the bank, the landlord and the brothers and sisters not taking it on, it is the transfer of a valuable asset. It needs the same four things as any other sale: a value, a timeline, a plan for your income and a plan for everyone else.

Families skip steps because the trust is already there. That trust is a good thing. It is also the reason the hard questions get left until they are expensive.

Why it is harder than it looks

Business Queensland's guide to succession says it plainly: passing a business to a family member is not necessarily a simple process. The family member may not have the interest or commitment to run it. More than one of them may want it, and that can create conflict.

Neither of those is solved by goodwill. Both are solved by deciding things early, and writing them down.

It needs a value

There are three reasons you need a figure, and none of them is the price you plan to charge.

The tax office uses market value whatever you charge. The ATO calls it the market value substitution rule. If you receive nothing for a CGT asset, you are taken to have received its market value. You can also be taken to have received market value where what you received was more or less than market value and you and the new owner were not dealing with each other at arm's length. The ATO says the rule may apply when transferring property to family or friends.

Arm's length, in the ATO's words, is when each party acts independently. A parent and a child dealing over the family business are not that. So selling the business to your daughter for a dollar does not make the sale price a dollar for tax. The capital proceeds can be taken to be the market value, and the gain is worked out from there, before any concessions you qualify for.

The duty office uses value too. The Queensland Revenue Office says business assets, including goodwill, can be dutiable when they are transferred, and that duty is calculated on the greater of the value of the business assets and the consideration paid. A low family price does not lower the figure duty is worked out on. The office also publishes a family business concession for primary production businesses acquired from a defined relative, and for a list of prescribed businesses acquired from a parent or grandparent. It has conditions and limits, and whether your business and your transfer fit is a question for your solicitor.

The rest of the family will want to know. Business Queensland recommends a professional valuation whether you are selling or gifting, because it gives you confidence to negotiate a fair price and helps avoid disputes. A family price below market is a gift of the difference. That can be exactly what you intend. It should be a decision, made with a number in front of you, and not an accident.

If the transfer happens on or after 1 July 2027, the new capital gains rules come into it as well, and the piece on the 1 July 2027 tax value explains how that date divides the gain.

It needs a timeline

Business Queensland suggests setting clear and realistic timelines for identifying and agreeing on a successor, completing the legal and financial paperwork, training the successor, handing over responsibilities and the final handover. Its guide puts the handover of responsibilities at three to six months, and notes the legal and financial compliance is the same as for any sale.

In practice the timeline starts earlier than that. Your son or daughter needs to have made real decisions in the business before they own it: quoting, hiring, dealing with the bank, carrying a bad month. Business Queensland suggests trial periods where more than one family member is interested. A trial period is also a fair test for one.

The consents take time as well. The landlord, the bank, the key suppliers and any licensing body will want to know who is taking over, and some of them have to agree.

It needs a plan for your income

This is the part families talk around. For some owners the business is the retirement plan.

If your child cannot pay the full price at the start, the gap is funded by you, through instalments, a loan or a share of the profits. Business Queensland's guide makes the point directly: if you would rather receive a regular dividend from the business than a lump sum, you need to be confident your successor can run it profitably enough to make those payments. The same is true of instalments.

That is the same funding problem that sits behind selling to employees, with one difference. If the payments stop, the person you have to chase is your own child. Put the terms in writing anyway: the amount, the dates, the interest, the security and what happens if a payment is missed. It protects the relationship as much as the money.

Some parents keep the premises and lease them to the business, or keep a shareholding for a period. Each has its own tax and legal consequences, and your registered tax agent and solicitor need to see the whole plan, not one piece of it.

It needs a plan for the others

The children who are not taking the business on are part of the deal whether or not they are at the table.

Fair and equal are not always the same thing. The child taking over may have spent years on a wage building it. The others may have built lives elsewhere. Business Queensland asks the questions families have to answer: whether ownership will be equal if more than one family member is involved, and whether any family members will have ownership without an active role. Where they disagree, it suggests mediation.

Three approaches are worth weighing:

• The child taking over pays a proper price, so the business becomes money the family can share.
• The will balances it, with other assets going to the others.
• The others hold a share of ownership without a role. That one needs care, because a sibling who owns part of a business and does not work in it may want dividends when the owner wants to reinvest.

The will matters here. In Queensland, section 41 of the Succession Act 1981 lets a child who is not left adequate provision under a will apply to the court for provision out of the estate. That is one more reason the plan for the others should be decided in your lifetime, explained to them, and drafted by a solicitor.

If nothing is decided and something happens to you first, the business passes without a plan, which is the problem in the piece on what happens to your business if you die before you sell it.

Who does what

• A registered tax agent: the capital gains tax, the market value rule, the concessions, the structure and the timing.
• A solicitor: the sale or gift documents, the loan terms, the will, any family agreement and the duty.
• A qualified valuer: the figure the tax office will look at.

Where I fit is the outside view. A market appraisal tells you what an outside buyer would be likely to pay and why, which is a useful reference when a family is deciding what price is fair. It is not a tax valuation, and I am not a valuer, a tax agent or a solicitor. The free readiness check is a sensible first step either way, because the twelve things a buyer's accountant and lender test overlap with what your son or daughter's bank will look at.

What to do

• Decide whether it is a sale or a gift, and get a value before you decide the price.
• Ask a registered tax agent what the market value rule and the concessions mean for your structure.
• Ask your solicitor about transfer duty and whether the family business concession fits.
• Write the income plan down, with the same terms you would give a stranger.
• Talk to the others early, and put the plan in your will.