What is an ‘earnout’ clause in a business acquisition?

The term ‘earnout arrangement’ (Earnout) has been defined by the Australian Taxation Office (ATO) as “any transaction in which an income-earning asset is sold for consideration that includes the creation of an ‘earnout right’ (Earnout Right) for the seller of the asset, according to TR 2007/D10.   An Earnout Right is further defined as: “a […]