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Authors: Nicky Harrison, Helen Johnson
Published: 1 March 2023
Pages: 19

Introduction

Rules for purchase price allocations (PPA) have been in force since 1 July 2021. The PPA rules encourage a purchaser and vendor in a transaction involving a mix of assets to adopt consistent tax positions in relation to those assets. The aim of the PPA rules is to reduce perceived harm to the tax base by tightening the framework that governs how parties to a transaction allocate the total purchase price between different asset classes for tax purposes. A key target for the rules is commercial property transactions, and parties need to be well informed of the implications of the rules as they are likely in many circumstances to alter the economic outcomes of a transaction. Business sales are also intended to be caught (but not share sales).

As the PPA rules continue to become embedded in market practice, the importance of seeking appropriate expert tax and contract advice early in a transaction should not be underestimated. It is essential that lawyers advising transaction parties and negotiating contractual agreements are up to speed with the proposed rules, so they can appropriately advise their clients, and ensure their clients seek appropriate tax and valuation assistance. Given the potential for impact on client economic outcomes, this is likely to be a high-risk advice area for conveyancing practitioners.
 

Content outline

 
  • Why should parties to a transaction care about the PPA?
  • Case study: Commercial property landlord
  • Purchase price allocation framework
  • Working with the PPA rules
  • Recommended contractual provisions
  • Concluding remarks and market observations
View contents page
HARRISON Nicky JOHNSON Helen  
Nicky Harrison
PwC Legal
Auckland		 Helen Johnson
PwC Legal
Auckland		  

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