Letter of Intent for Business Purchase (Australia)
Non-Binding LOI for Business Acquisition — Subject to Contract
LETTER OF INTENT — BUSINESS PURCHASE
Date: [LOI Date]
BUYER:
[Buyer Name] (ABN [Buyer ABN], ACN [Buyer ACN])
[Buyer Address], [Buyer Suburb], [Buyer State] [Buyer Postcode]
SELLER:
[Seller Name] (ABN [Seller ABN], ACN [Seller ACN])
[Seller Address], [Seller Suburb], [Seller State] [Seller Postcode]
The Buyer and the Seller are referred to collectively in this Letter of Intent as the "Parties".
LETTER OF INTENT FOR BUSINESS PURCHASE
Dear [Seller Name],
[Buyer Name] ("Buyer") is pleased to submit this non-binding Letter of Intent ("LOI") to [Seller Name] ("Seller") in connection with the proposed acquisition of the business known as [Business Name] (the "Business") as further described below.
This LOI is not legally binding on the Parties, except for the provisions expressly identified as binding below. Nothing in this LOI obliges either Party to enter into a formal Business Sale Agreement (the "Formal Agreement"), and neither Party has any legal obligation to complete the acquisition unless and until the Formal Agreement is duly executed by both Parties.
1. THE BUSINESS
1.1 The Seller owns and operates the following business, which is the subject of this LOI:
[Business Description]
1.2 The Buyer proposes to acquire the Business by way of [Acquisition Structure].
1.3 The precise scope of what is included in the acquisition (including assets, liabilities, employees, contracts, intellectual property, and goodwill) will be set out in the Formal Agreement and is subject to negotiation and agreement between the Parties following completion of due diligence.
2. INDICATIVE PURCHASE PRICE
2.1 Subject to the satisfactory completion of due diligence and the conditions set out in clause 5, the Buyer proposes an indicative purchase price of [Indicative Price] (AUD) (the "Indicative Price"). The Indicative Price is non-binding and subject to adjustment following due diligence.
2.2 The Indicative Price is based on the following:
[Price Basis]
2.3 The proposed payment structure is as follows:
[Payment Structure]
2.4 The Buyer reserves the right to adjust the Indicative Price following due diligence if it identifies matters that have a material impact on the value or risk profile of the Business. Any such adjustment will be subject to negotiation and agreement between the Parties.
3. DUE DILIGENCE
3.1 The Buyer intends to conduct a due diligence investigation of the Business ("Due Diligence") for a period of [Due Diligence Period] days commencing from the date of this LOI (or such other date as the Parties may agree in writing) (the "Due Diligence Period").
3.2 The scope of the Due Diligence will include the following:
[Due Diligence Scope]
3.3 The Seller agrees to provide, or procure the provision of, all information and access reasonably requested by the Buyer and its advisers for the purpose of Due Diligence, subject to the confidentiality obligations in clause 7.
3.4 The Buyer's obligation to proceed with the acquisition is subject to the satisfactory completion of Due Diligence to the Buyer's satisfaction, acting reasonably. If Due Diligence is not satisfactorily completed within the Due Diligence Period, the Buyer may withdraw from the acquisition by written notice to the Seller, without liability.
4. CONDITIONS
4.1 The acquisition of the Business is subject to the satisfaction (or waiver, where applicable) of the following conditions precedent:
[Key Conditions]
4.2 The Parties shall use their reasonable endeavours to satisfy the conditions set out in clause 4.1 as promptly as practicable. Each Party shall keep the other Party reasonably informed of progress in satisfying any condition that is within its reasonable control.
4.3 If any condition precedent remains unsatisfied by [Long Stop Date] (the "Long Stop Date"), either Party may terminate this LOI by written notice, and neither Party shall have any further liability to the other, except in respect of the binding provisions of this LOI.
5. FORMAL AGREEMENT
5.1 The Parties agree to negotiate in good faith with the objective of executing a Formal Agreement for the acquisition of the Business by the Long Stop Date.
5.2 The Formal Agreement will be a comprehensive Business Sale Agreement (or Share Sale Agreement, as applicable) prepared by the Buyer's solicitors and incorporating the indicative commercial terms set out in this LOI, together with such other terms as the Parties may negotiate and agree following completion of Due Diligence.
5.3 If the Parties have not executed the Formal Agreement by the Long Stop Date, either Party may withdraw from the acquisition by written notice to the other Party, without liability (except as to binding provisions already accrued).
6. CONFIDENTIALITY (BINDING)
6.1 This clause 7 is legally binding on both Parties regardless of whether a Formal Agreement is executed.
6.2 Each Party acknowledges that in the course of this LOI and during Due Diligence it will have access to the other Party's confidential information (including financial data, business plans, customer information, pricing, employee details, trade secrets, and technical information) ("Confidential Information"). Each Party must:
- keep all Confidential Information strictly confidential;
- use Confidential Information solely for the purpose of evaluating the acquisition of the Business;
- not disclose Confidential Information to any third party without the prior written consent of the disclosing Party, except to its legal, financial, or technical advisers on a strictly need-to-know basis and subject to equivalent confidentiality obligations; and
- promptly return or destroy all Confidential Information if the acquisition does not proceed.
6.3 The confidentiality obligations in this clause 7 survive the expiry or termination of this LOI for a period of 3 years.
7. GENERAL PROVISIONS
7.1 Costs: Each Party shall bear its own legal, financial, and advisory costs in connection with this LOI, the Due Diligence, and the negotiation of the Formal Agreement, unless otherwise agreed in writing.
7.2 GST: Unless otherwise stated, all prices and amounts in this LOI are stated exclusive of GST. GST treatment of the acquisition will be addressed in the Formal Agreement, having regard to the potential application of the going concern exemption in s 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).
7.3 No Partnership: Nothing in this LOI creates a partnership, joint venture, agency, or employment relationship between the Parties.
7.4 Entire Agreement: This LOI constitutes the entire understanding between the Parties with respect to the subject matter hereof and supersedes all prior representations and understandings.
7.5 Governing Law and Jurisdiction: This LOI (including all binding provisions) is governed by the laws of [Governing State], Australia. Each Party submits to the non-exclusive jurisdiction of the courts of [Governing State] for the resolution of any dispute arising out of or in connection with this LOI.
7.6 Counterparts: This LOI may be executed in counterparts and a counterpart transmitted by email or electronic means is as effective as an original.
This Letter of Intent for Business Purchase is signed by the authorised representatives of each Party.
BUYER
Name: [Buyer Name]
ABN: [Buyer ABN] | ACN: [Buyer ACN]
Address: [Buyer Address], [Buyer Suburb], [Buyer State] [Buyer Postcode]
SELLER
Name: [Seller Name]
ABN: [Seller ABN] | ACN: [Seller ACN]
Address: [Seller Address], [Seller Suburb], [Seller State] [Seller Postcode]
Buyer
________________
Signature
Date: ________________
Seller
________________
Signature
Date: ________________
What Is a Letter of Intent for Business Purchase (Australia)?
A Letter of Intent for Business Purchase in Australia sets out a party's intentions and the proposed terms for a transaction before a binding agreement is entered, consistent with the Corporations Act 2001 (Cth).
The LOI bridges the gap between preliminary discussions and the execution of the formal, thorough Business Sale Agreement (or Share Sale Agreement). It records the commercial understanding reached in principle, establishes a framework for due diligence and further negotiation, and provides legal protections for both parties during the acquisition process — most importantly through binding exclusivity and confidentiality provisions.
The legal status of a Letter of Intent for Business Purchase in Australia is governed by the principles in Masters v Cameron (1955) 91 CLR 353. The typical LOI for a business acquisition falls within the third category identified in that case — the parties do not intend to be legally bound until the formal Business Sale Agreement is executed. However, binding ancillary provisions (exclusivity, confidentiality, costs) are routinely included and are enforceable as contractual obligations regardless of whether the acquisition proceeds.
An LOI for business purchase is used across all types of business acquisitions in Australia, from small local businesses to large commercial enterprises. It is a practical and commercially essential first step in any acquisition process, as it: records the key commercial terms agreed in principle; commits both parties to a defined due diligence and negotiation timeline; protects the seller's confidential financial and business information disclosed during due diligence; prevents the seller from entertaining competing offers during the exclusivity period; and provides a clear framework within which the formal Business Sale Agreement will be prepared and negotiated.
The legal framework governing the Letter of Intent for Business Purchase (Australia) in Australia draws on several key statutes and regulatory bodies. Under the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission (ASIC) regulates companies and financial services. Section 127 of the Corporations Act 2001 governs company execution of documents. The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 (Cth). The Australian Taxation Office (ATO) administers the Goods and Services Tax under the A New Tax System (Goods and Services Tax) Act 1999. The Federal Court of Australia and Supreme Courts of each state have jurisdiction over corporate disputes. Parties executing a Letter of Intent for Business Purchase (Australia) in Australia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Corporations Act 2001 (Cth) sets the foundational requirements.
When Do You Need a Letter of Intent for Business Purchase (Australia)?
An LOI for Business Purchase is appropriate at the point in the acquisition process when the buyer and seller have had preliminary discussions, reviewed the seller's information memorandum or financial summaries, and reached broad agreement in principle on the key commercial terms — but before the buyer has conducted detailed due diligence or instructed its solicitors to prepare the formal Business Sale Agreement.
You should use an LOI for Business Purchase when: you are a buyer who has identified a business you wish to acquire and want to record your intention to proceed and the key proposed terms before committing to the cost of thorough due diligence and legal advice; you are a seller who has received a serious indication of interest from a prospective buyer and want to document the proposed terms and secure the buyer's commitment to an exclusivity period before disclosing sensitive financial and operational information; you are engaging a business broker or intermediary who requires a written statement of intent before helping the exchange of detailed financial and business information; the acquisition is of sufficient size and complexity that the parties require a structured process — including due diligence, conditions precedent, and a defined timeline — rather than a direct negotiation to contract; or you need to commit the seller to an exclusivity period to prevent the seller from entertaining competing offers while you invest time and resources in due diligence and the preparation of the formal agreement.
An LOI is particularly important in Australian business acquisitions where the due diligence process is likely to be extensive — for example, where the business operates under licences or permits that must be transferred, has a significant employee base with accrued entitlements, or has complex commercial contracts that require legal review. In these situations, the exclusivity period in the LOI is critical to protect the buyer's investment in the due diligence process.
What to Include in Your Letter of Intent for Business Purchase (Australia)
A well-drafted Australian Letter of Intent for Business Purchase should contain the following key elements.
Identification of the Business and Proposed Acquisition Structure — The LOI should clearly describe the business being acquired (including its trading name, operations, and location) and specify the proposed acquisition structure — asset sale, share sale, or a mixed arrangement. The distinction between an asset sale and a share sale is commercially and legally significant in Australia, affecting the allocation of liabilities, the GST treatment of the transaction (including the potential application of the going concern exemption under s 38-325 of the GST Act), and the Capital Gains Tax position of the seller.
Indicative Purchase Price and Basis — The LOI should state the indicative purchase price clearly (in AUD) and explain the valuation methodology on which it is based (for example, a multiple of EBITDA, a net asset value, or a revenue multiple). The LOI should make clear that the Indicative Price is non-binding and subject to adjustment following due diligence. The proposed payment structure — including any deposit, balance payable at completion, working capital adjustments, earn-out provisions, and vendor finance arrangements — should also be set out.
Due Diligence Scope and Period — The LOI should specify the duration of the due diligence period and the key areas of investigation: financial due diligence, legal due diligence, operational due diligence, employment due diligence, and (where relevant) environmental due diligence. The seller's obligation to provide access to information and personnel should be clearly stated.
Conditions Precedent — The LOI should list the key conditions that must be satisfied before the formal Business Sale Agreement is executed, such as satisfactory due diligence, board approval, landlord consent to assignment of premises, transfer of licences and permits, and no material adverse change.
Exclusivity Clause — A binding exclusivity clause prevents the seller from engaging with other prospective buyers during the defined exclusivity period. This is one of the most commercially important provisions in the LOI and should clearly state that it is legally binding.
Confidentiality Clause — A binding confidentiality clause protects the financial, operational, and customer information disclosed by the seller during due diligence. It should clearly define Confidential Information, restrict its use to evaluation of the acquisition, and provide for return or destruction if the acquisition does not proceed.
GST Acknowledgment — The LOI should acknowledge the potential application of the GST going concern exemption and confirm that GST treatment will be addressed in the formal agreement, with the input of qualified tax advisers.
Additional compliance elements for a Letter of Intent for Business Purchase (Australia) used in Australia include: Under the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission (ASIC) regulates companies and financial services. Section 127 of the Corporations Act 2001 governs company execution of documents. The Australian Competition and Consumer Commission (ACCC) enforces the Competition and Consumer Act 2010 (Cth). The Australian Taxation Office (ATO) administers the Goods and Services Tax under the A New Tax System (Goods and Services Tax) Act 1999. The Federal Court of Australia and Supreme Courts of each state have jurisdiction over corporate disputes. Forms-legal.com provides this template as a starting point for Australia-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Letter of Intent for Business Purchase (Australia) (Australia) [Legal document template]. Forms Legal. https://forms-legal.com/australia/business/contracts/letter-of-intent-business-purchase-australia
"Letter of Intent for Business Purchase (Australia) (Australia)." Forms Legal, 2026, https://forms-legal.com/australia/business/contracts/letter-of-intent-business-purchase-australia.
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note = {Free legal document template. Based on Corporations Act 2001 (Cth)}
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Frequently Asked Questions
An asset sale and a share sale are the two main acquisition structures in Australian commercial transactions. In an asset sale, the buyer purchases specific assets of the business (plant, equipment, goodwill, customer contracts, intellectual property, stock) and does not assume the seller's liabilities unless expressly agreed. The buyer can be selective about which assets and liabilities it takes on, and each asset may require a separate transfer document. In a share sale, the buyer purchases all of the shares in the company that owns the business. The buyer acquires the company's entire asset and liability position — including known and unknown liabilities — as the company itself continues. From a tax perspective, the seller of shares may be entitled to the Capital Gains Tax (CGT) discount and the small business CGT concessions under Division 152 of the Income Tax Assessment Act 1997 (Cth) if the relevant conditions are met. The buyer in a share sale cannot step up the tax cost base of the business assets. In an asset sale, the going concern exemption under s 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) may allow the transaction to be structured as GST-free if the relevant conditions are satisfied. Legal advice from a qualified solicitor and tax advice from an accountant are strongly recommended when choosing the acquisition structure.
A Letter of Intent for Business Purchase in Australia is generally non-binding as to the principal commercial terms — the indicative purchase price, the proposed acquisition structure, and the conditions — and does not obligate either party to complete the acquisition. The legal analysis follows the principles in Masters v Cameron (1955) 91 CLR 353. However, certain ancillary provisions within an otherwise non-binding LOI are routinely expressed as legally binding, including the exclusivity clause (preventing the Seller from engaging with other buyers during the exclusivity period), the confidentiality clause (protecting financial and business information shared during due diligence), and the costs provision. These binding ancillary provisions are enforceable as contractual obligations regardless of whether the acquisition proceeds. An LOI for business purchase is a very different document from a Formal Business Sale Agreement — it does not transfer ownership of the business and is not a substitute for the thorough formal agreement and its associated due diligence, financial and legal advice.
Due diligence in an Australian business acquisition typically covers the following areas. Financial due diligence involves reviewing the business's financial statements, management accounts, tax returns, Business Activity Statements, debtors and creditors ledgers, and financial projections to verify the financial performance and position of the business. Legal due diligence involves reviewing material contracts (customer contracts, supplier contracts, leases), employment agreements and any industrial instruments (Modern Awards or Enterprise Agreements under the Fair Work Act 2009 (Cth)), intellectual property registrations, licences and permits, litigation and disputes, and regulatory compliance. Operational due diligence involves reviewing key customer relationships, key employee retention (including the relevance of the Seller's personal relationships to the business), IT systems, and plant and equipment condition. Employment due diligence is particularly important in Australian acquisitions given the detailed requirements of the Fair Work Act 2009 (Cth) and the potential for outstanding entitlements (accrued annual leave, long service leave) to transfer with the business. Tax due diligence involves reviewing the business's tax compliance, outstanding ATO assessments, and the availability of tax concessions such as the CGT small business concessions.
Under s 38-325 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth), the supply of a going concern is GST-free (zero-rated) if: (1) the supply is for consideration (payment); (2) the recipient (buyer) is GST-registered or required to be; (3) the supplier (seller) and the recipient agree in writing that the supply is the supply of a going concern; and (4) the supplier supplies all of the things that are necessary for the continued operation of an enterprise, and the supplier carries on that enterprise until the day of supply. If the going concern exemption applies, the buyer does not pay GST on the purchase price, which can represent a significant saving. The parties must expressly agree in the Business Sale Agreement that the transaction is the supply of a going concern. Tax advice should be obtained to confirm that the conditions are met and that the exemption applies, as the ATO may challenge the application of the exemption if the conditions are not strictly satisfied. The LOI should acknowledge the potential application of the going concern exemption and provide that the GST treatment will be addressed in the formal agreement.
When a business is sold in Australia, the Seller has significant obligations regarding employees under the Fair Work Act 2009 (Cth) and relevant state and territory legislation. In an asset sale, the existing employment contracts do not automatically transfer to the buyer — the Seller must terminate existing employment, and the buyer must offer new employment to the employees it wishes to retain. The Seller is responsible for paying out all employee entitlements accrued up to the termination date, including accrued annual leave, accrued long service leave (under state-specific legislation), and redundancy pay (if applicable). Employees who are not offered reemployment by the buyer may be entitled to redundancy pay. In a share sale, the employment relationships continue with the company, and all accrued entitlements remain obligations of the company. Modern Awards and Enterprise Agreements under the Fair Work Act continue to apply to the employees. The buyer should conduct thorough employment due diligence to identify any outstanding entitlements, breaches of the National Employment Standards, or underpayments (which have been subject to significant ATO and Fair Work Commission enforcement action in recent years). Employment law advice from a solicitor specialising in employment law is strongly recommended for any business acquisition.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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