To sell or not to sell? How to make the most of a $4.5 million business sale

For Andrew and Kate, the offer on the table is generous enough to fund a comfortable retirement several times over. The real question isn't whether they can afford to retire, but how to structure the sale so they keep flexibility, avoid unnecessary tax and don't lock too much of their wealth away.

Andrew, 58, is the founder and managing director of an engineering services business on the Gold Coast. He owns 70% of the company and earns about $300,000 a year in salary and dividends. His wife Kate, 55, is the company's finance manager, owns the remaining 30% and earns $110,000.

They've received an offer of $4.5 million for their shares: $3.6 million upfront, plus a $900,000 earn-out after two years if the business hits its profit targets. Andrew would stay on as general manager for those two years.

Helping them work through the decision is Centaur Financial Services CEO and financial adviser Hugh Robertson.

The situation

• Andrew, 58, founder and managing director of an engineering services business on the Gold Coast. Owns 70% of the company. Salary and dividends about $300,000 a year.
• Kate, 55, the company's finance manager. Owns 30%. Salary $110,000.
• Offer to buy business: $4.5 million for the shares. $3.6 million now, plus a $900,000 earn-out after two years if profit targets are met. Andrew stays on as GM for those two years.
• Home: $2.6 million, no debt.
• SMSF: $2.5 million (Andrew $1.7 million, Kate $0.8 million), in diversified ETFs, Australian shares and cash.
• Investment apartment: $900,000 with a $300,000 loan.
• Cash: $200,000.
• Two adult children, 25 and 22, both saving for a first home.
• Spending: about $170,000 a year.

If you'd like some general guidance on your own financial situation, email the Livewire team at [email protected] and your scenario could feature in a future edition.

The small business CGT opportunity

Both Andrew and Kate are over 55, have owned the business for more than 15 years and are retiring. That should qualify them for the small business 15-year exemption, which means the entire capital gain on the sale is disregarded.

Robertson explains that each can also contribute their share of the proceeds to super under the small business CGT cap, which is $1.935 million per person in 2026-27. These contributions sit outside the normal caps and aren't restricted by their total super balance.

Andrew's 70% share of the sale is worth $3.15 million, so he could contribute the full $1.935 million. Kate's 30% share is $1.35 million, all of which fits under her cap.

"Until this year, filling both caps would have been an easy decision. But Division 296 started on 1 July 2026, adding an extra 15% tax on the share of earnings attributable to a super balance above $3 million. Filling Andrew's cap would take his super from $1.7 million to about $3.6 million," Robertson says.

Three wrinkles

Robertson points to three factors that make the decision less straightforward:

• The transfer balance cap: Only $2.1 million each can go into a tax-free retirement pension. Anything above that stays in the accumulation phase, where earnings are taxed at up to 15% and still count towards Division 296.
• Access to super: Kate can't access her super until she turns 60, five years away. Andrew can access his at 60, when the earn-out ends.
• The earn-out isn't guaranteed: The $900,000 depends on the business performing under its new owner.

Three options

Robertson modelled three scenarios through to Andrew's 90th birthday. All figures are in today's dollars and exclude the home and investment apartment. Each option includes the $400,000 gift to the children and $170,000 a year in spending from age 60.

Before jumping into the options, it's important to remember that this isn't about whether Andrew and Kate can retire: all three options comfortably fund the couple's lifestyle. The real differences lie in risk, tax and flexibility.

Option 1: Keep the business, hire a GM at 60, sell at 65

This option has the widest range of outcomes and requires the most assumptions. Even without selling right away, Andrew is still able to retire at 60 and hand over the reins but, as Robertson explains: "A firm offer today may not be there in seven years, and Andrew never really gets to retire."

If profit holds at $500,000 a year and the business still sells for $4.5 million, the couple would have about $9.4 million at age 90. But if profit slips to $350,000 and the price falls to $3 million, that drops to about $6 million. Lifetime tax would be around $2.3 million, mostly because dividends are taxed at top marginal rates.

"This option has the highest result if everything goes to plan, plus five more years of strong income," Robertson says.

The downside is that more than 40% of their wealth would remain in a single private company that depends heavily on Andrew.

Option 2: Sell now and fill both CGT caps

Andrew contributes $1.935 million, taking his super to about $3.6 million, and Kate contributes $1.35 million, taking hers to about $2.15 million. After the gifts to the children, repaying the apartment loan and sale costs, only about $600,000 would be left outside super once the earn-out is paid.

The couple would have about $8.1 million at age 90. Division 296 would cost about $260,000 over their lifetime, and total lifetime tax would be about $1.1 million. If the earn-out isn't paid, the result falls to about $6 million, with almost nothing held outside super.

The upside is that this option has the most money in the lowest-tax environment. CGT cap contributions also form part of the tax-free component of super, which helps if super is eventually passed to adult children.

However, Division 296 applies from day one and both balances end up above $2.1 million, so neither can make further non-concessional contributions. There's very little accessible money outside super, and Kate's super is locked away until she turns 60.

Option 3: Sell now, take Andrew's super to $3 million and keep the rest outside

Under this plan, Andrew contributes $1.3 million, taking his super to about $3 million, while Kate contributes her full $1.35 million. About $1.25 million would sit outside super in joint names once the earn-out is paid.

The couple would have about $8.3 million at age 90 and Division 296 drops to about $66,000 over their lifetime because Andrew only drifts above the threshold through investment growth. Lifetime tax would be about $1.05 million. If the earn-out isn't paid, they'd still have about $6.5 million, including about $600,000 outside super.

"This option avoids most of the Division 296 tax and finishes slightly ahead of Option 2. The money outside super can be accessed at any time, whether for the children, emergencies or the years before Kate turns 60. Splitting investment income between two people on modest taxable incomes also keeps tax low."

The downside for Option 3 is that about $635,000 of Andrew's CGT cap goes unused and can't be used later without another eligible sale. Earnings outside super are taxed at personal rates, which will rise as that money grows, and Andrew's balance will creep above $3 million anyway over time.

The recommendation

Robertson recommended Option 3: take the offer and fill Andrew's super to around $3 million, rather than to the top of his cap.

"Selling locks in a result they already have. After that, filling the cap and keeping some money outside are close on paper. What separates them is flexibility, and that's worth more than the last few dollars of tax," Robertson says.

"Most business owners undersell themselves in retirement, not just in the sale. Part of my job is giving them permission to spend."

The money held outside super also won't just be sitting in the bank. Robertson says this should be allocated in "time-horizon buckets": cash for the next couple of years, then income assets, then growth.

Insurance and estate planning

Once the sale is complete, Andrew and Kate can not only cancel their key-person and business expenses cover, but with about $10 million in net assets, the couple is also close to being self-insured for life cover.

Robertson recommends new wills with testamentary trusts for the children, binding death benefit nominations, enduring powers of attorney and a succession plan for the SMSF's corporate trustee. Super paid to adult children is taxed on the taxable component, which is another reason holding some money outside super has value for this family.

The bottom line

Andrew and Kate are in an enviable position: every option on the table funds their lifestyle comfortably. The decision comes down to how much risk they want to keep, how much tax they're willing to pay, and how much flexibility they want along the way. 

By selling now and keeping a meaningful amount outside super, they lock in the value they've built while keeping their options open for the decades ahead.

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