Business Brokers and Share Sales: The Hidden Tranche 2 Obligation
Tranche 2 is not just for houses. If you help clients sell a business through a share sale, you are caught. But the distinction between share sales and asset sales is more nuanced than it first appears.
The scope: Beyond residential property
Many business brokers assume Tranche 2 only applies to residential real estate agents or to lawyers and accountants. This is incorrect. The legislation captures a broader range of activities, including assistance with company transfers and legal arrangement transfers, by professional service providers.
The law: Section 6, Table 6, Item 2
Under the reformed AML/CTF Act, Section 6, Table 6, Item 2 covers:
Table 6, Item 2: Trust and Company Service Provider Activities
"Assisting... to sell, buy or transfer a body corporate or legal arrangement"
This captures business brokers who facilitate the transfer of company ownership through share sales, AND transfers of legal arrangements such as partnerships, joint ventures, trusts and unincorporated associations.
The nuance: Share sale vs Asset sale
The critical distinction for business brokers is how the business is transferred. However, the analysis is more nuanced than a simple "shares = caught, assets = safe" framing.
Share Sale (CAUGHT)
The buyer purchases the shares of the company that operates the business. The company (body corporate) transfers to new ownership.
This triggers Table 6, Item 2 - you are a reporting entity.
Asset Sale (IT DEPENDS)
The buyer purchases the assets of the business (equipment, goodwill, stock). Whether this is caught depends on the underlying structure and what is actually being transferred.
May still trigger Item 2 if legal arrangements are transferred (see below).
Why asset sales are not automatically safe
Critical: Legal arrangements within asset sales
Item 2 does not only cover body corporates. It also covers legal arrangements, which are defined in Section 5 of the Act to include:
- Express trusts (excluding testamentary trusts)
- Partnerships
- Joint ventures
- Unincorporated associations
- Foreign equivalents of the above
If an "asset sale" includes the transfer of a partnership interest, a JV stake, a trust or any other legal arrangement, it IS caught by Item 2 regardless of whether any shares change hands.
The "economic equivalent" test
Section 5 of the Act defines "transfer" to include any act that is reasonably regarded as the economic equivalent of a transfer. An asset sale deliberately structured to achieve the same economic outcome as a company or legal arrangement transfer could still be caught under this broader definition. The substance of the transaction matters, not just the label.
The 25% beneficial ownership threshold
Item 2 includes a control test. It applies where the seller holds more than 25% beneficial ownership prior to the transfer, OR the buyer will hold more than 25% after the transfer.
This means that minority stake transfers (below 25%) are not caught by Item 2. If a broker assists with selling a 10% shareholding in a company, this would not trigger Item 2.
Practical examples
Example 1: Cafe sale via shares
A client owns "ABC Cafe Pty Ltd" and wants to sell. You find a buyer who purchases 100% of the shares in ABC Cafe Pty Ltd.
Result: You assisted in transferring a body corporate (100% is above 25%). You are caught by Table 6, Item 2 and need an AML/CTF program.
Example 2: Cafe sale via assets (sole trader)
A sole trader owns a cafe and wants to sell. The buyer purchases the cafe equipment, goodwill, stock and lease assignment. No company, trust, partnership or other legal arrangement is transferred.
Result: No body corporate or legal arrangement was transferred. This transaction is unlikely to be caught by Table 6, Item 2 alone.
Example 3: Cafe sale via assets (partnership)
Two partners run a cafe through a partnership. They sell the "business" by transferring the partnership interests to the buyer. This is labelled an "asset sale" in the contract.
Result: A legal arrangement (partnership) was transferred. Despite being labelled an "asset sale," you are caught by Table 6, Item 2.
Caution: Even if a transaction is not caught by Table 6, Item 2, you may still be caught if the sale includes real property (Table 5). Always analyse each transaction structure carefully.
What this means for business brokers
If you regularly assist with share sales (transferring Pty Ltd companies) or transfers of partnerships, trusts or joint ventures, you are a reporting entity under Tranche 2. This means:
- AUSTRAC enrolment: Register before the deadline
- AML/CTF program: Develop and implement before 1 July 2026
- Customer due diligence: Identify buyers and sellers, including beneficial owners
- Staff training: Ensure your team understands obligations
- Suspicious matter reporting: File SMRs when required
Assessing your exposure
- Review your transaction history: What percentage of your sales involve share transfers, partnership transfers or other legal arrangement transfers vs pure asset sales?
- Analyse the structures: Even transactions labelled "asset sales" may involve legal arrangement transfers. Look at the underlying structure, not just the contract label.
- Consider your client base: Do clients typically prefer share sales for tax or liability reasons? Do they operate through partnerships or trusts?
- Assess real property involvement: Even pure asset sales may trigger Table 5 if property transfers are included.
- Check the ownership percentages: Transfers of less than 25% beneficial ownership are not caught by Item 2.
Key Takeaway
Section 6, Table 6, Item 2 catches business brokers who assist with "selling, buying or transferring a body corporate or legal arrangement." Share sales clearly trigger this obligation, but asset sales that involve the transfer of partnerships, trusts, JVs or unincorporated associations are also caught. The label on the contract does not determine whether Item 2 applies. If you facilitate any transfers of body corporates or legal arrangements involving more than 25% beneficial ownership, you need an AML/CTF program by 1 July 2026.
Read our complete Tranche 2 Guide
Key dates, affected sectors, obligations and how to prepare
Disclaimer: This article is general information only. It is not legal, financial or compliance advice. HeadStart Docs™ provides free compliance documents, not legal services.
We do not guarantee the accuracy of information provided. Obligations may apply depending on your designated services. Always confirm your specific requirements with a qualified adviser.
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