Closing My Business: Winding Down Properly

Cancel your ABN and GST registration

Cancel your ABN through the Australian Business Register within 28 days of ceasing business activity. This also cancels linked registrations for GST, luxury car tax, wine equalisation tax, and fuel tax credits. GST registration must be cancelled within 21 days of ceasing to carry on your enterprise. Lodge all outstanding activity statements and income tax returns, and ensure any debts are paid or under arrangement before cancelling. PAYG withholding or other registrations not automatically cancelled may need separate cancellation with the ATO.

Final BAS and income tax return

Lodge a final BAS including all taxable sales, purchases, and adjustments up to the GST cancellation date. After that date you cannot charge GST or claim input tax credits. Lodge an income tax return covering business income and deductions up to the cessation date. Sole traders report in the business schedule and indicate this is the final year of business. Income or deductions arising after cessation (recovered bad debts, later refunds, write-offs) may still need to be returned in subsequent years.

Trading stock and depreciating assets

Any trading stock on hand at cessation must be brought to account. Stock disposed of through clearance or bulk sale generates assessable trading income. Stock retained for private use is treated as sold to yourself at market value, and that value is assessable. For depreciating assets, a balancing adjustment event occurs when you sell, scrap, or start using an asset solely for private purposes. If the termination value exceeds the adjustable value, the difference is assessable income. If the termination value is less than the adjustable value, the difference is a deductible balancing adjustment. Apportion for mixed private and business use.

Capital gains and small business CGT concessions

Disposing of active capital assets (business real property, goodwill, shares in a company, interests in a trust) triggers CGT events. Division 152 of the ITAA 1997 provides four concessions that can reduce, defer, or eliminate the gain entirely. The 15-year exemption disregards the entire gain if you have owned an active asset for 15 years or more and meet age or retirement conditions. The 50% active asset reduction halves the remaining gain on top of the general 50% CGT discount for individuals. The retirement exemption disregards up to $500,000 lifetime of capital gains from qualifying business assets. The small business rollover defers the gain if you acquire a replacement active asset within two years.

Employee obligations on closure

All outstanding wages, casual loadings, and penalty rates must be paid up to the final day of work, plus written notice or payment in lieu under the Fair Work Act 2009. Accrued annual leave and, where applicable, long service leave must be paid out per the Fair Work Act and relevant state or territory legislation. If roles are genuinely redundant due to closure, redundancy pay obligations apply (subject to small business exemptions for employers with fewer than 15 employees). Lodge STP finalisation declarations so employees' income statements are marked as final. Pay all superannuation guarantee contributions up to the final day of work by the usual quarterly due dates.

Company deregistration with ASIC

Voluntary deregistration requires that the company is not carrying on business, has assets worth less than $1,000, has no outstanding liabilities, is not involved in legal proceedings, and all ASIC fees and penalties are paid. All members must agree and directors must declare the conditions are satisfied. The process involves finalising accounts, lodging all outstanding company tax returns, cancelling GST, PAYG, and ABN registrations, closing or transferring bank accounts and business names, distributing remaining assets to shareholders, and lodging ASIC Form 6010 with the deregistration fee. ASIC publishes a notice and deregisters the company after the notice period if no objections are received.

Records and superannuation after closure

The ATO requires most business records kept for at least five years from when the record was prepared, obtained, or the transaction completed (whichever is later). Depreciating asset records must be retained for the entire ownership period plus five years after disposal. CGT asset records must span the full ownership period plus five years after the CGT event. Employment records must be kept for seven years under Fair Work requirements. Once you cease trading, employer SG contributions stop, but you can continue making personal contributions to super and claim a tax deduction for eligible personal contributions subject to age-based and annual contribution caps.

Statute references

• Income Tax Assessment Act 1997, Division 152 (small business CGT concessions)
• A New Tax System (Goods and Services Tax) Act 1999, Division 25 (cancellation of registration)
• Fair Work Act 2009 (notice, redundancy, leave entitlements)
• Fair Entitlements Guarantee Act 2012
• Corporations Act 2001, Part 5A.1 (voluntary deregistration)
• Tax Administration Act 1953, Division 382 (record-keeping requirements)

Frequently asked questions