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When a business sale and purchase occur, the allocation of the purchase price between assets acquired has tax consequences. While there are general allocation rules, in some cases it is possible for vendors and purchasers to allocate different amounts to the same assets, often resulting in a tax benefit.
As a result, government proposes to insert new rules determining how purchase prices are to be allocated to business assets in order to ensure symmetry between purchasers and vendors. The key proposals are:
These rules will only apply to transactions with a purchase price of more than $1 million, or where the purchaser’s total allocation to tax base property is more than $100,000
This amendment would apply to agreements for the disposal and acquisition of property entered into on or after 1 April 2021.