CA ANZ recently provided feedback to Inland Revenue on Purchase price allocation: an officials' issues paper. This issues paper sought to address income tax issues relating to mixed supplies where two or more types of property are supplied in a single transaction, and where the tax treatment of those types of property is not the same for all parties.

Officials proposed that:

• Where the vendor and purchaser agree on an allocation in the sale and purchase agreement, both parties must file their tax returns using the agreed values.
• If the parties do not agree, the allocation will be determined by the seller who must notify the purchaser and Inland Revenue within a specified time frame.
• If the vendor does not provide an allocation within the specified time, then the purchaser must request an allocation. If no allocation is provided by the vendor within a defined time frame the purchaser may allocate the purchase price and notify Inland Revenue and the seller (who is required to use it).

CA ANZ does not support the proposals as they are outlined in the issues paper. We believe the Commissioner has existing tools to combat situations where taxpayers are failing to follow agreed allocations in sale and purchase agreements.

We have significant concerns regarding the practicalities of the proposals and how they impact commercial negotiations.