Vendor Finance for FY27: The Succession Recap
Vendor Finance for Accommodation FY27 | Switchboard Finance
Accommodation Finance
Vendor Finance · Succession · FY27
Vendor Finance for FY27: The Succession Recap
People hear vendor finance and picture the seller carrying all the risk. In an accommodation succession it is closer to the opposite: the carry is the last slice, not the whole stack, and the FY27 tax calendar is quietly making the timing matter more.
Quick Answer
Vendor finance lets a seller leave a slice of the price in the deal so an accommodation business changes hands when a bank will not fund the full amount. It sits behind the senior lender, suits a planned exit strategy, and works best when matched to a sound vendor finance structure.
Vendor finance did not get less useful, the tax calendar got more urgent
Vendor finance is still one of the most practical ways to move an accommodation business between owners, and heading into FY27 the case for structuring a carry has arguably grown. The reframe worth holding onto is simple: a vendor carry is not the seller funding the buyer's whole purchase. The carry is the last slice, not the whole stack. The senior lender still does most of the heavy lifting against the trade, and the seller leaves a smaller amount in to bridge the gap to the price.
This matters now because the succession question has a date attached. Several FY27 tax settings touch how an operating business is sold and how the proceeds are taxed, so the decision to pass a venue on, and how to structure it, deserves to be made deliberately rather than left to the last week of a financial year. For the mechanics of selling an operating venue, our piece on accommodation business succession finance walks the full path; this is the FY27 recap of why a carry earns its place. The wider backdrop helps too: accommodation and food services stayed one of the steadier parts of the small business economy through 2024-25, as the ABS sets out in its Counts of Australian Businesses.
How a vendor carry actually sits in the deal
A vendor carry is money the seller agrees to leave in the business, repaid by the buyer over an agreed period. In structure it is second-ranking behind the senior lender, which is exactly why the senior lender is comfortable with it. The carry takes the back seat on security and on repayment order, so it never competes with the primary loan.
On the credit side, the single item that makes or breaks the arrangement is the paperwork that confirms that ranking. A deed of priority is the deal-critical item. It records who is paid first if anything goes wrong, and the senior lender will want it agreed before it funds. Get it on the table early and the deal moves; leave it to settlement week and it stalls.
On size, a carry is usually modest against the whole price. A typical vendor carry of around 10 to 25 percent, varies by deal, sits on top of a senior loan written against the going concern. The buyer then works it down, with the slice often refinanced out across a two to five year window, indicative, as the trade is proven under new ownership. Crucially for the seller, a lender reads a carry as a receivable you hold, not a debt you owe, which keeps your own position cleaner than people expect.
Faster or slower: what makes a carry settle cleanly
Where this commonly lands is on preparation. The same carry can glide through or grind, and the difference is rarely the size of the number. It is whether the ranking, the security and the trade evidence are ready to read.
Settles Faster
- Deed of priority drafted and agreed up front
- Carry sized as a modest top slice over the senior loan
- Clean, current trading figures the senior lender can rely on
- A clear repayment or refinance window mapped from day one
- Seller and buyer aligned on a planned succession, not a rushed exit
Drags Slower
- Priority left vague until settlement week
- Carry stretched to cover too much of the price
- Patchy or out-of-date going-concern numbers
- No exit pathway, so the carry has nowhere to go
- Structure decided after the deal is signed, not before
A carry that is treated as the last slice and documented early tends to behave. One stretched to plug a valuation gap, with the ranking left loose, is where a clean succession turns into a slow one. A second-ranking position can be confirmed against a registered second mortgage where that suits the security on offer.
What the FY27 tax calendar adds to the decision
The reason a recap lands now rather than in spring is that FY27 carries real tax-timing signals for anyone weighing a sale. The replacement of the 50 percent capital gains tax discount with an inflation-based method and a minimum tax on gains received Royal Assent on 26 June 2026, so it is law, and it commences on 1 July 2027. Trust-held letting entities face a separate measure, a minimum tax on discretionary trust distributions timed for 1 July 2028, which is announced and not yet law. So the headline capital gains change is fixed in timing while the trust measure can still move.
For a seller, that changes the order of operations. Eligible operators may also have the small business capital gains tax concessions in play on the sale of active business assets, which is exactly the kind of thing to model before a sale is structured, not after. A vendor carry fits this picture because it lets a seller stage an exit and gives a buyer time to settle, rather than forcing a single hard line on one date. On the asset side, the instant asset write-off rules also feed into fit-out and refurbishment timing around a handover, which is worth checking with your accountant alongside the structure.
Vendor finance remains a clean way to pass an accommodation business between owners, because the carry is the last slice over a senior loan, sits second behind the senior lender on a deed of priority, and reads as a receivable the seller holds. Heading into FY27, the value is less about the structure changing and more about the tax calendar making early, deliberate planning worth the effort. The buyer-side version of this stack is covered in our vendor finance for motel expansion piece, and the wider lane sits in the accommodation finance hub.
Key takeaway: Treat a vendor carry as a documented top slice and map it against the FY27 tax calendar early, not in the last week of the financial year.Frequently Asked Questions
Vendor finance is still worth it heading into the new financial year, and for an accommodation succession the FY27 tax calendar arguably strengthens the case rather than weakening it. A vendor carry helps a deal settle when a bank will not fund the full price, and the seller is treated as holding a receivable, not taking on new debt.
Because the carry is the last slice, not the whole stack, it is usually small relative to the senior loan and refinanced out across a two to five year window, indicative and varies by deal. See how it fits a planned exit strategy.
A deed of priority is the document that sets out who gets paid first when a vendor carry sits behind a senior lender, and it is the deal-critical item in almost every carry structure. It confirms the carry is second-ranking behind the senior lender, which is the arrangement the senior lender needs to see before it will fund.
Without it agreed early, deals stall, so it belongs on the table at the start, not the settlement run. The ranking is often recorded against a second mortgage where the security supports it.
A vendor carry typically covers a smaller slice of the purchase price, with a typical vendor carry of around 10 to 25 percent, varies by deal, sitting on top of the senior loan rather than replacing it. The senior lender still does the heavy lifting against the going concern valuation, and the carry bridges the gap to the price.
The exact share depends on the strength of the trade, the security on offer and the senior lender's appetite, so it is best confirmed for your deal through our vendor finance page.
Leaving a vendor carry in a sale usually helps rather than hurts your later borrowing, because a lender reads a carry as a receivable you hold, not a debt you owe. For many sellers the carry is paid back as the buyer refinances, freeing up proceeds over time.
If you are then looking to buy or hold your own home on business income, a specialist pathway such as a one doc home loan can read that position cleanly.
Whether to structure a sale before the FY27 capital gains tax changes depends on your numbers, but they are a reason to plan early rather than leave it. The replacement of the 50 percent capital gains tax discount received Royal Assent on 26 June 2026 and commences on 1 July 2027, so the headline change is law and its timing is set. The separate minimum tax on discretionary trust distributions is timed for 1 July 2028 and is not yet law, so that detail can still move.
A vendor carry can give a buyer time and a seller a staged exit, which is why succession structuring and the tax calendar are worth raising with your accountant and a broker together. Our accommodation business succession finance piece sets out the wider mechanics.
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