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Closing your business

Whatever your reasons for closing your business, it can take time. How much is dependant on its size and complexity.

The decision to close a business is usually due to one of two reasons:
  • You no longer want to run the business and have no one to pass it onto.
  • The business is not making enough money to keep going or to sell.
Here are some suggested steps to guide you through the process.
  • Set a closing date for your business

    Setting a date to officially close your business from operations will help you to properly plan your business's closure. The earlier you set a closing date, the earlier you can start letting suppliers, employees, customers and other parties know.
  • Take care of your employees

    If your business has employees, you must notify them and officially finalise their employment before your business closes.
    Letting go of employees can be difficult. Good communication is key to making the time easier for both yourself and your employees. You may wish to talk to your employees straight away to explain the situation to them.
    Giving notice
    No matter how you inform your employees, you are required by law to give them official notice in writing by either:
    • delivering the notice personally
    • leaving the notice at your employee's last known address
    • sending the notice to your employee's last known address by pre-paid post.
    You must provide your employees with the right amount of notice of ending employment (also known as a notice period). The notice period will vary depending on how long your employee has been working for you, and the type of employee they are (e.g. you don't need to give a notice period if your employee is casual).
    Find out more about notice periods on the Fair Work Ombudsman website.
    Paying out entitlements
    There are some entitlements, including any outstanding wages and any accrued leave, that you need to pay out.
    The final entitlements you need to pay your employees will vary depending on several factors, including:
    • the terms of your existing contract
    • the relevant Modern Award
    • the number of employees your business has
    • whether the employee is entitled to redundancy
    • if long service leave is payable.
    Read the Fair Work Ombudsman's final pay information to find out how to finalise pay for your employees.
    Employment termination payments (ETP)
    You'll also need to pay ETPs if your employees are eligible. An ETP may include:
    • payment in lieu of notice
    • a gratuity or 'golden handshake'
    • compensation for the loss of a job
    • unused rostered days off
    • unused sick leave.
    Find out more about taxation of termination payments on the Australian Taxation Office (ATO) website.
    Finalising taxes for employees
    Whether you've sold or closed your business, there are also a number of tax issues that you need to finalise for your employees. These can include:
    Visit the ATO website for more information on what you need to do when your employees cease employment.
    Supporting your employees
    Keep in mind that some employees may find the change stressful. Communication is key. To support them, consider giving them as much notice as possible so they have time to think about their options.
    Treating your employees fairly will help to ensure they continue to work efficiently and give you plenty of notice if they move on to new jobs.
  • Notify your suppliers and customers

    If your business uses suppliers, you'll need to:
    • let them know that your business is closing
    • tell them the date from which you'll no longer need their services
    • pay them any outstanding amounts.
    It's also a good idea to let your customers know when you're closing the business. This will minimise their inconvenience, and may also maximise your profits right up until the date you close. How you let your customers know will depend on the type and size of your business, but can involve:
    • posting a notice on your shop front
    • posting a notice on your business's website
    • advising customers personally
    • advising customers through your business's social media channels
    • holding a 'closing down' sale, with the added benefit of selling off your stock
    • sending out an email or letter campaign.
  • End your lease agreements

    If your business has a lease, you'll need to end your lease agreement when your business closes.
    Depending on the conditions of your lease, you may still need to pay rent and other costs up until the end of the lease term.
    You may be able to avoid paying these costs by transferring your lease to a new tenant. However, keep in mind that certain risks and conditions may apply to a transfer, depending on the lease agreement.
    If you're unsure of the conditions in your lease agreements, you should contact your lawyer for professional advice.
  • Sell your business assets and pay outstanding bills

    When you close your business, you'll need to sell or manage your business assets. Business assets can include:
    • all outstanding stock
    • tools, equipment and machinery
    • property and premises, including land or buildings
    • business vehicles
    • furniture, fixtures and fittings
    • domain names
    • intellectual property such as patents or trademarks
    • licenses and permits.
    You'll also need to pay all outstanding bills when your business closes.
  • Deal with your tax and legal matters

    When closing down your business, there are a number of tax and legal matters you may need to deal with. Aside from finalising employee payments, they can include:
    Also consider whether Capital Gains Tax (CGT) and GST applies to the closure of your business. For example, if your business is registered for GST, you may need to include GST in the price of individual business assets that you sell.
    Find out more about taxes when closing your business on the ATO website.
  • Keep your business records

    After your business closes, you still have obligations to keep your business records, including financial records, customer records and employee records.
    Depending on the type of record and the industry you're in, there will be different requirements for how long and how secure your records need to be kept.
    Generally, your business records should be kept for a minimum of five years after they are prepared, obtained or the transaction is completed, whichever is latest. Records containing sensitive information will also need to be kept and disposed of in a way that is in line with the Privacy Act 1988.
    The Office of the Australian Information Commission website has information on how the Privacy Act applies to small business.
    The ATO also provides a record keeping evaluation tool for you to assess your business's record keeping and information management.
    You can contact the ATO for any record keeping questions you may have.
  • Tie up other loose ends

    Some other steps to remember when closing your business, include, but is not limited to:
    • disconnecting services (telephone, power, water, internet etc.)
    • redirecting your mail through Australia Post
    • closing your business bank accounts
    • cancelling your web hosting and domain name if you have an online presence
    • shutting down your social media channels
    • cancel leases, licenses and permits, as you're still responsible for any agreements and obligations until the arrangements officially end.
  • Look after yourself

    Closing your business can be an emotional time. After all, you’ve probably put countless hours, money and energy into running your business.
    It’s important to know that there is assistance available. These include:
    • financial advice through the MoneySmart website, to help you take care of yourself financially
    • career advice through the myfuture website if you're looking for a new career direction
    • employment assistance through Australian JobSearch, if you're looking to find a job
    • employment and financial assistance through the Department of Human Services.

Our friendly team is here to help

If you need any assistance, please call 8429 3801 for information relating to small business or visit our contact page for more information.