The good news is that most of it can be planned. The catch is that the planning has to happen before you sign.
This guide is general information only and isn't tax advice. Tax depends on your structure and circumstances, so talk to your accountant before you agree a price or sign an agreement. Reviewed by [Accountant name, firm] in [Month Year].
Is there capital gains tax on selling a business in NZ?
As at October 2026, New Zealand has no general capital gains tax. Goodwill on the sale of an established business is usually treated as a capital receipt and isn't taxed as income.
That doesn't mean the whole price is tax-free. Several parts of a sale can create taxable income, and they're covered below. Tax policy can change, including after the 7 November 2026 general election, so check the current position with your accountant.
GST: zero-rating a going concern
If the sale meets the rules for a supply of a going concern, GST is charged at 0%. Generally, that means:
- You and the buyer are both GST-registered
- The business is sold as a going concern, capable of carrying on trading
- You both agree in writing, usually in the sale and purchase agreement, that the supply is of a going concern
If those conditions aren't met, GST at 15% may apply to the price. The agreement needs to say clearly whether the price includes or excludes GST. Getting this wrong is one of the most expensive mistakes a seller can make.
Depreciation recovery
Over the years you've claimed depreciation on your plant, equipment and fit-out, reducing their tax book value. If part of the sale price is allocated to those assets above their tax book value, the difference is generally taxable income, up to what you originally paid.
Example (illustrative): you bought kitchen equipment for $80,000 and its tax book value is now $30,000. If $50,000 of the price is allocated to it, $20,000 is depreciation recovered and is taxable. Goodwill wouldn't create the same income.
That's why the price allocation matters so much.
Purchase price allocation rules
For agreements entered into from 1 July 2021, buyers and sellers generally have to use the same allocation of the purchase price across asset classes. This usually applies when total consideration is $1 million or more. Different thresholds and exceptions apply in some cases, such as sales of residential land.
In practice:
- The simplest approach is to agree the allocation in the sale and purchase agreement
- If it isn't agreed, the seller generally has three months after the change of ownership to notify an allocation to the buyer and Inland Revenue
- If the seller doesn't, the buyer then has a further window to notify one
- Allocations should reflect relative market values
The seller and buyer have opposite interests here. You generally want less allocated to depreciable assets. The buyer generally wants more, so they can depreciate it. Negotiate this with your accountant's input, and before you sign.
Trading stock
Stock sold with the business is usually taxable income in the same way as any other stock sale. The amount allocated to stock in the agreement generally needs to reflect its value, and the stocktake at settlement sets the final figure.
Selling assets or selling shares
If your business is in a company, you can sell the business's assets, or sell the shares in the company.
Asset sale. The company sells the business and keeps the proceeds. Depreciation recovery and stock income are taxed in the company. Getting money out to shareholders afterwards has its own tax consequences. Most small business sales in NZ are asset sales.
Share sale. The buyer takes over the company with its history, including any tax liabilities. Proceeds from selling shares held as a long-term investment are generally capital. Buyers are often more cautious about share purchases and usually want extensive warranties.
Which suits you depends on your structure, the buyer and the assets involved. This is firmly accountant territory.
Other points that catch sellers out
Holiday pay and final wages. Paying out employees' final wages and holiday pay at settlement is taxed through PAYE in the usual way. Budget for it.
Restraint of trade. If part of the price is specifically paid for your agreement not to compete, ask your accountant how it will be treated.
Property sold with the business. If you're selling commercial premises as well, land has its own tax rules. The bright-line test applies to residential property only, but other land rules can still apply.
Final returns and provisional tax. Selling a business changes your income for the year. Your accountant can update your provisional tax and file final GST and income tax returns.
Get your price and tax planning in step
The best results come when your broker and accountant work together from the start. We'll give you a written opinion of what the business will sell for. Your accountant can then model the after-tax result and help you structure the price allocation before you go to market.
Start with a free, confidential business appraisal. Price allocation and GST both need to be written into the business sale agreement, so raise them early. If you need a formal valuation for tax purposes, such as a sale between related parties, that calls for an independent business valuation from a chartered accountant.