The short answer
In most Australian share sales above the very small end, the headline price is not the final price. The parties agree an enterprise value on a cash-free, debt-free basis — the buyer takes the business without its surplus cash and without its interest-bearing debt — assuming the business is delivered with a normal, ongoing level of working capital. Working capital is the money tied up in day-to-day trading: trade debtors, inventory, work in progress and prepayments, less trade creditors, accruals and other short-term operating liabilities. Because that figure moves every day, the contract fixes a target level (the 'peg') and then measures the actual level at completion. If the business is handed over with more working capital than the peg, the buyer pays the seller the surplus dollar-for-dollar; if it is handed over with less, the seller refunds the deficit. That reconciliation is the working capital adjustment, and it is usually settled 30 to 90 days after completion once the completion accounts are finalised. Nothing here is tax or legal advice — the mechanism lives in the sale agreement, drafted by lawyers, with tax treatment for a registered tax agent. What this article explains is how the number is built, and where it quietly moves.
How the completion-accounts adjustment actually works
The mechanism converts an agreed enterprise value into a final equity price through a short bridge, then re-measures one leg of that bridge after the deal closes. Understanding the sequence is what stops a seller being surprised by a claw-back weeks after they thought the deal was done.
- ·Enterprise value is agreed first — typically a maintainable-earnings multiple — on the explicit assumption of a cash-free, debt-free business carrying a normal level of working capital.
- ·The equity bridge then adds surplus cash, subtracts interest-bearing and 'debt-like' items, and adds or subtracts the difference between actual and target working capital, to arrive at what the buyer actually pays for the shares.
- ·At completion the buyer pays an estimated price using a good-faith estimate of the completion balance sheet, because the real numbers are not yet closed off on settlement day.
- ·One party (usually the seller, sometimes the buyer) then prepares draft completion accounts as at the completion date, within an agreed window — commonly 30 to 60 days.
- ·The other party reviews them within a further window and either accepts them or lodges specific objections; unresolved items are referred to an independent accounting expert whose determination binds both sides.
- ·Once the accounts are agreed or determined, the true-up is paid: a working capital surplus flows to the seller, a deficit flows back to the buyer, generally dollar-for-dollar, and the price is final.
Setting the peg: the number the whole deal turns on
The target working capital figure is the single most contested number in a completion-accounts deal, because it decides who funds the working capital the business needs to keep trading the day after settlement. Set the peg too high and the seller effectively hands the buyer free working capital they already paid for in the enterprise value; set it too low and the buyer has to inject cash on day one to cover trade creditors and payroll they thought were funded. The peg should represent the normalised level required to run the business through its ordinary cycle, which is why it is almost always built as an average — most commonly a twelve-month rolling average of month-end working capital — so that seasonality, a big December debtor build, a slow January, a lumpy stock reorder, nets out rather than being frozen at whatever a single balance-date snapshot happened to show. Getting there depends on definitions being nailed down before completion, not argued afterward.
- ·What is 'in' and 'out': the agreement must list exactly which ledger accounts count as working capital, because an item left ambiguous becomes a dispute worth real money at true-up.
- ·Consistent accounting policies: the peg and the completion accounts must be prepared on the same basis — same debtor provisioning, same stock obsolescence treatment, same WIP and accrual policy — or the comparison is meaningless.
- ·Debt-like carve-outs: buyers push to move items such as accrued but unpaid tax, employee leave provisions, deferred revenue, customer deposits and overdue creditors out of working capital and into the net-debt bridge, where they are deducted at full value rather than netted against the peg. Whether an item is 'working capital' or 'debt-like' can move the price by six figures on its own.
- ·The reference period: a twelve-month average that captures a full BAS and superannuation cycle behaves very differently from a three-month average anchored near a payment date — which is precisely where the next section bites.
Why GST, PAYG and super timing can swing it $50,000-$200,000
The most underappreciated driver of the adjustment is the calendar. GST, PAYG withholding and the superannuation guarantee are not paid as they are incurred — they accrue as current liabilities and are remitted periodically, on the BAS and SG cycle. Net GST and (for medium withholders) PAYG withholding are usually settled monthly or quarterly on the business activity statement: quarterly BAS payments fall on the 28th of the month after each quarter, monthly on the 21st. The superannuation guarantee — 12% of ordinary time earnings since 1 July 2025 — is due quarterly, 28 days after quarter-end. Between those payment dates the liabilities build up. A completion date that lands three days before a quarterly BAS and SG run can carry a full quarter of accrued GST, withholding and super sitting on the completion balance sheet as current liabilities; a completion date the week after those payments clear carries almost none. Here is the trap that catches sellers: under a cash-free, debt-free deal the business's cash is excluded, so paying down those statutory liabilities does not reduce a counted asset — it simply removes a current liability, which makes measured working capital go up. So a completion just before the BAS run shows depressed working capital (a deficit against the peg), and a completion just after shows healthier working capital (a surplus) — for the identical business, purely because of when settlement fell in the cycle. On a mid-sized trading business the accrued statutory balance can easily be $150,000-$300,000, so the timing effect alone routinely moves the adjustment by $50,000-$200,000. The fix is not clever, it is disciplined: define the peg and the completion accounts to treat these statutory liabilities the same way, and either build the peg from a full-cycle average so the peaks and troughs net out, or carve GST, PAYG and SG into the net-debt bridge and settle them explicitly — so the price reflects the business, not the date on the settlement statement.
A worked deficit and surplus example
Take a business sold for an agreed enterprise value of $4,000,000, cash-free and debt-free, with a target working capital peg of $600,000 struck from a twelve-month average. Two completion outcomes show how the adjustment lands — and how the BAS cycle can flip the sign of the answer without anything real changing in the business.
- ·Deficit case: the completion accounts measure actual working capital at $480,000. That is $120,000 below the $600,000 peg, so the seller refunds $120,000 and the final equity price falls accordingly — the buyer has to inject that $120,000 to trade normally, and has paid for a full working-capital base in the enterprise value, so the shortfall comes back to them.
- ·Surplus case: actual working capital instead comes in at $720,000. That is $120,000 above the peg, so the buyer pays the seller an extra $120,000 — the seller left more debtors and stock in the business than the normal level, and is compensated for it.
- ·The timing flip: suppose the $480,000 deficit case had a completion date three days before the quarterly BAS and super run, carrying roughly $140,000 of accrued net GST, PAYG withholding and superannuation as current liabilities. Had settlement fallen the week after those payments cleared, those liabilities would be largely gone and — because cash is excluded under cash-free, debt-free — measured working capital would sit near $620,000. The same business swings from a $120,000 deficit owed by the seller to a roughly $20,000 surplus owed to the seller: a $140,000 turnaround driven entirely by the calendar, which is exactly why the peg and the statutory-liability treatment have to be defined before completion, not reconciled in anger afterward.
Locked box vs completion accounts — and who sets a neutral peg
The alternative to a post-completion true-up is a locked box. There, the parties fix the equity price at signing off a recent, reliable historical balance sheet — the 'locked box' accounts at a set date — and there is no later working-capital adjustment at all. The seller is treated as economically owning the business from the locked box date, the buyer usually pays a daily value accrual (a 'ticker') from that date to completion, and the seller gives leakage covenants promising that no value has left the box to them — no dividends, related-party payments or above-market remuneration — beyond agreed 'permitted leakage'. Locked box buys certainty and kills the completion-accounts dispute, which is why it dominates competitive auctions and private-equity deals; it depends on the buyer trusting a set of accounts they diligence hard, so it fits businesses with clean, recent numbers and a stable balance sheet. Completion accounts fit the opposite: a moving balance sheet, seasonality, or accounts that are not yet reliable enough to lock — where measuring the real position at completion is worth the true-up risk. Either way, the number that decides who wins — the peg in one, the locked-box balance sheet in the other — is exactly the number each side's own adviser is incentivised to nudge. That is where an independent read earns its fee. Oliver Group's Valuation Range & Scenario Review (from $12,995 + GST) models the target working capital, tests its sensitivity to the completion date and BAS cycle, and sets out a defensible peg range on the market value basis in IVS 104, the reporting standard in APES 225 and the ATO's market valuation guidance — senior-reviewer signed, with the working file retained. Crucially, we take no referral fee or commission from the broker, the accountant or either party to the deal: paying for introductions would compromise the independence that is the entire point of a neutral peg, so we do not. Oliver Group is an independent Australian valuation firm operated by Oliver Pty Ltd (established 2013); our lead valuer, Jackson Wilson, has personally valued more than 3,000 businesses across his career. One closing caveat in keeping with that independence: we prepare valuations only. We are not a registered tax agent, nothing here is tax, legal or financial advice, and how a specific GST, PAYG, superannuation or CGT position is treated is a question for your registered tax agent and lawyer against the actual sale agreement. For adjacent deal structures, see /insights/earn-outs-explained-business-sales and /insights/vendor-finance-and-business-sale-price.