Income tax Dates
When a transaction includes 2 or more asset classes, special notification rules may apply if both buyer and seller do not agree on how the sale price should be allocated to which asset classes.
When the special rules apply
These rules apply where either:
- the total consideration for the purchased property is $1 million or more, or
- the only purchased property is residential land, including buildings and chattels, and the total consideration is $7.5 million or more.
Total consideration includes the purchase price and the value of any liabilities the buyer takes over.
The seller has 3 months to notify the other party and us
Within 3 months of the change in ownership of the property, which will usually be the settlement date, the seller may determine the amounts allocated. For the allocation to be valid, the seller must notify both the buyer and us of the allocation within that time.
For each asset class, the seller must generally allocate at least the higher of:
- its relative market value compared with the other asset classes
- the seller’s tax book value, where applicable.
When the buyer can notify the other party and us
If the seller does not make a valid notification within 3 months, the buyer may determine the allocation and must notify both the seller and us within the following 3 months. This must be within 6 months of the change in ownership of the property, which will usually be the settlement date. The buyer’s allocation must reflect the relative market value of each asset class compared with the other asset classes.
Once a valid notification is made, both the buyer and seller must use the notified allocation for income tax purposes.
If no one notifies the other party or us in time
If neither the seller nor the buyer makes a valid notification within the required timeframes:
- we may determine the allocation and notify both parties
- the buyer’s tax deductions may be delayed until an allocation is notified.
Where we determine the allocation, we may take into account a late allocation provided by either the buyer or seller.