New purchase price allocations rules apply to contracts entered into on or after 1 July 2021. These rules require the vendor and purchase to agree in writing the allocation to be used between various categories of property included in a sale and purchase.

These categories include buildings, depreciable property, trading stock and non-taxable property such as land on capital account.

Where no agreement is made, one party can unilaterally determine the allocation within certain limits or the if no parties make a determination the Commissioner can do so. This can have implications for either party on taxable income or deductions such as depreciation recovered.

Crucially for the purchaser, they are also denied a deduction until these allocations have been agreed or determined by the Commissioner. This puts a significant incentive on the purchaser to get these agreements.

While there is a de minimis, it has always been best practice and our recommendation to have these agreed as part of the agreement process.