Income Tax Act 2007 section 784

Exemption for sales of going concerns

Section 784 provides an exemption from income tax on capital amounts received from selling a business, partnership share, or company shares, provided the sale reflects the value of a genuine going concern.

• When a capital amount arises from disposing of the assets of a profession or vocation (including goodwill), a share in a partnership carrying on a profession or vocation, or shares in a company, an income tax exemption may apply under the sales of occupation income rules.
• The exemption depends on meeting the "going concern condition": the value of what is disposed of must be attributable to the value of the profession, vocation, or company business as a continuing, operating enterprise at the time of disposal.
• For company share disposals, the reference to the company's business extends to include the business of any subsidiary or other company in which it holds shares, whether directly or indirectly.
• This exemption is not unlimited — it is restricted by section 785, which claws back the relief to the extent that the capital amount reflects the sale of future earnings rather than the genuine going concern value of the business.