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Business or Property Sale - New Price Allocation Rules

If you're looking to buy or sell a property or business - take note!

There has been a recent tax rule change over the treatment of purchase price splits for business or property transactions. The new rules come into effect on 1 July 2021 and are designed to ensure that both the seller and purchaser treat the split of the purchase price in the same manner.

If the purchase price includes 2 or more different asset types such as land, buildings, goodwill or stock, these should be separately disclosed on the Sale and Purchase Agreement and agreed upon by the seller and purchaser.

• If the various assets are not split out in the Sale and Purchase Agreement, then the seller has 3 months to advise the purchaser and IRD of the split. The purchaser then must use that split.  

• If the seller has not advised the split within 3 months, the purchaser then has 3 months to do the same, in that case the seller must use the values the purchaser says.  

• If neither party make a determination of the purchase price split within 6 months of the transaction then IRD will determine the split.

There is also an anti-avoidance provision which allows the IRD to change the split if they do not think it is appropriate.

The rules around how to split assets are quite complex, to ensure you get the best tax outcome we highly recommend that you talk with your Campbell Tyson advisor before you sign a Sale and Purchase Agreement.

If you have any questions on how these rules may affect a transaction you are contemplating please give us a call on 0508 692 226.

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