Before buying a café, identify every payment already collected for something the customer may claim after settlement. Gift cards, event deposits, prepaid catering, cake orders and account credits can represent future service work even though the seller received the cash.

The buyer should not accept a single “gift voucher liability” figure. Reconcile the underlying records, determine which obligations will transfer, estimate the practical cost and timing of fulfilment, and document the allocation in the sale agreement and settlement statement. Legal, accounting and tax advisers should confirm the result for the proposed transaction structure.

Build a complete outstanding-obligations register

Request native exports rather than screenshots or a manually prepared total. The register should separately identify:

  • each gift card or voucher number, issue date, original value, remaining balance, expiry terms and redemption history;
  • promotional or loyalty vouchers, which may operate differently from purchased gift cards;
  • deposits for functions, group bookings, cakes and catering, with the customer’s order and cancellation terms;
  • orders paid in full but not yet supplied, including fulfilment date, menu, quantity, delivery and staffing commitments;
  • customer credits arising from refunds, complaints or cancelled orders;
  • the entity that received each payment and the venue or channel where it can be redeemed; and
  • GST treatment, general-ledger account, POS balance and any manual journal or write-off.

Reconcile the register to the POS or gift-card platform, booking system, catering calendar, customer correspondence, general ledger and bank receipts. Test individual items from issue through redemption or refund. Investigate duplicate numbers, negative balances, bulk adjustments, cards marked expired before their stated date, and liabilities that disappeared through a journal rather than customer use.

Check the gift-card rules and actual terms

The Australian Consumer Law contains specific requirements for gift cards. Most gift cards supplied to consumers on or after 1 November 2019 must be redeemable for at least three years, must display the relevant expiry information prominently and cannot carry prohibited post-supply fees. Exceptions apply to certain cards and circumstances, including some reloadable, promotional, loyalty and genuinely discounted arrangements (ACCC; Federal Register of Legislation).

Do not infer compliance from the POS expiry field. Obtain the card design, online terms, issue receipts, customer emails and staff instructions. Check whether the café has represented that cards never expire, whether cards can be partly redeemed, and whether customers were unable to use them during a closure. The ACCC says conditions and restrictions must be clearly stated and that, where a business-imposed restriction prevented use during a temporary closure, a remedy may include extending the expiry period.

Ownership change also requires transaction-specific legal review. The ACCC states that a new owner must honour existing gift cards and discount vouchers where the business was sold as a going concern—that is, its assets and liabilities were sold—or where the buyer acquired shares in the company. A buyer should have its lawyer determine how that guidance applies to the exact deal, what liabilities are assumed, and how the sale documents should address customer claims.

Separate deposits from prepaid orders

The word “deposit” can obscure several different arrangements. A refundable security amount is not the same as a part-payment for a catering order, and a reservation deposit may have different cancellation consequences from a fully prepaid function. Read the customer terms and the evidence of what was promised.

For every live order, confirm:

  • the event or collection date and the remaining amount payable;
  • what food, beverages, staffing, equipment or delivery the café must provide;
  • whether prices were fixed before supplier or wage costs changed;
  • cancellation, rescheduling and refund rights;
  • whether ingredients or third-party services have already been purchased; and
  • whether the buyer will have capacity, approvals and suitable staff to perform it.

Section 36 of the Australian Consumer Law addresses wrongly accepting payment. It includes circumstances where a business accepts payment without intending to supply, intends to supply something materially different, or knows or ought reasonably to know it cannot supply within the specified or a reasonable time; it also addresses timely supply after payment is accepted (Federal Register of Legislation). This makes a vague handover of prepaid commitments more than an accounting inconvenience.

Do not confuse face value, fulfilment cost and settlement value

Three amounts may matter:

  1. Customer claim: the unused face value or the goods and services promised.
  2. Buyer fulfilment exposure: the expected food, labour, delivery, platform and overhead costs when customers redeem or orders are performed.
  3. Transaction adjustment: the amount the parties agree should move economically from seller to buyer because the seller received cash and the buyer will perform or refund.

These amounts need not be identical. Some cards may never be redeemed, while a prepaid catering order could require substantial labour and inputs. A dollar-for-dollar adjustment may overstate the buyer’s cost in one case and understate it in another. Conversely, reducing the adjustment to food cost alone ignores capacity, labour, tax, refunds and the customer relationship. The sale agreement should define the method rather than leaving settlement staff to improvise.

Hypothetical example: a café has $18,000 of unused purchased gift-card value and $7,000 of deposits for four future catering jobs. The buyer should not simply deduct $25,000 or accept the seller’s estimated ingredient cost. It should validate each balance, model likely redemption and full fulfilment costs, identify remaining customer payments, obtain tax advice, and negotiate an adjustment or retention consistent with who must honour each obligation.

Check GST and accounting treatment separately

Tax treatment depends on the arrangement. Under Division 100, certain face-value vouchers are not taxable when supplied; GST may arise when the underlying taxable supply is made on redemption, and unredeemed vouchers can create an increasing adjustment in specified circumstances. The ATO’s GSTR 2003/5 explains these rules.

The ATO also distinguishes a genuine security deposit from an instalment or part-payment. GSTR 2006/2 explains that Division 99 can defer GST treatment for a security deposit until it is applied as consideration or forfeited, subject to the facts and the taxable-supply rules. Labels in a booking system are therefore not conclusive.

Have the buyer’s accountant reconcile the tax records, deferred or unearned revenue accounts, redemptions, refunds and proposed settlement entry. Confirm who will issue any post-settlement refund or tax document and who bears an adjustment relating to the seller’s period.

Put the handover into the transaction documents

Before settlement, agree a cut-off time and produce a final, system-generated schedule. The sale documents should address which items transfer, the adjustment formula, any retention, omitted-liability indemnity, customer refunds, disputed balances, records access and responsibility for pre-settlement tax reporting. Avoid deleting or expiring cards merely to clean up the ledger.

Plan the operational handover as well: migrate balances without changing card numbers, test redemption before opening, brief staff, preserve order notes, secure necessary customer contact data, and prepare consistent communications. If the buyer will not assume a category of obligation, the seller’s fulfilment or refund plan should be clear before customers arrive at the new counter.

Buyer decision checklist

Proceed only when the buyer can answer yes to these questions:

  • Does the detailed register reconcile to independent systems and accounts?
  • Are expiry terms and gift-card practices legally reviewed?
  • Can every live prepaid order be delivered on the promised terms?
  • Does the buyer understand face value, expected fulfilment cost and GST timing?
  • Do the sale agreement and settlement statement allocate each obligation clearly?
  • Will systems, records, staff instructions and customer communications work from day one?

An unexplained balance or an unworkable future booking is not cured by calling it “normal breakage”. It is an unresolved customer and transaction risk.

Sources

Disclaimer

This article provides general information only. It does not constitute legal, tax, accounting, financial, credit, valuation or other professional advice. Circumstances differ. Obtain advice from appropriately qualified advisers before acting or entering a transaction.