07/01/2026
Buying or selling a property or business? Here’s what you need to know about sale price allocation rules.
With property and business transactions steady, the IRD is paying particularly close attention to how purchase prices are allocated. Getting it wrong can trigger audits and unexpected tax outcomes, so it’s more important than ever to get it right.
If your transaction involves $1m+ in business assets or commercial property, or $7.5m+ in residential land and chattels, the purchase price allocation rules apply. These rules ensure buyers and sellers use the same asset values for tax purposes, avoiding mismatched positions.
What to keep in mind:
-Aim to agree on allocation in the sale and purchase agreement.
-If there's no agreement, the seller can set the allocation within three months of settlement and notify the buyer and IRD.
-If the seller doesn’t act, the buyer can allocate within the next three to six months.
-Allocations must reflect genuine market value and can impact tax outcomes like depreciation recovery and capital gains.
-Before signing a commercial agreement, it’s wise to get both tax and legal advice to understand the full picture.
If you need support navigating these rules, the Hammond Davidson team is here to help - https://hammonddavidson.co.nz