Part G
Avoidance and non-market transactions
Market value substituted
GC 21Purchase price allocation required: no agreement
This section applies when—
- for consideration, a person (person A) disposes (the disposal), to another person (person B), items of property (the purchased property) that, for person A or for person B, fall into 2 or more of the following classes (the classes of purchased property) and the relevant person uses different income tax treatments for 2 or more of the classes of purchased property:
- trading stock, other than timber or a right to take timber:
- timber or a right to take timber:
- depreciable property, other than buildings:
- buildings that are depreciable property:
- financial arrangements:
- purchased property for which the disposal does not give rise to assessable income for person A or deductions for person B; and
- trading stock, other than timber or a right to take timber:
- person A and person B have not agreed, and have not recorded in a document, amounts of the total consideration allocated to any of the classes of purchased property before the earlier of—
- the day person A files a return of income in relation to their tax position for the purchased property:
- the day person B files a return of income in relation to their tax position for the purchased property.
- the day person A files a return of income in relation to their tax position for the purchased property:
This section does not apply if—
- the total consideration for the purchased property in the disposal is less than $1 million; or
- the only purchased property in the disposal is residential land together with its chattels, and the total consideration for them is less than $7.5 million.
If subsection (1)(a) applies for person A, person A may notify both the Commissioner and person B of the amounts (the allocated amounts) allocated by person A to the classes of purchased property within 3 months of the change in ownership of the purchased property. An allocated amount must reflect the greater of—
- the relative market value of the relevant class of purchased property proportional to the other classes of purchased property; and
- person A’s tax book value for the relevant class of property described in subsection (1)(a)(i) to (v).
If the total amounts that would be allocated by subsection (3) exceed the consideration payable for all of the classes of purchased property, then the excess is applied—
- first, to reduce any amount allocated to the class of property described in subsection (1)(a)(vi):
- second, to reduce, pro rata, any amounts allocated to the classes of property described in subsection (1)(a)(i) to (v).
If person A does not notify person B as provided for in subsection (3), person B may notify the Commissioner and person A of the amounts (the allocated amounts) allocated by person B to the classes of purchased property within 6 months of the change in ownership of the purchased property. An allocated amount must reflect the relative market value of the relevant class of purchased property proportional to the other classes of purchased property.
If person A and person B do not notify the relevant people in accordance with subsection (3) or (5), the Commissioner may allocate, to the relevant classes of purchased property (the allocated amounts),—
- the amounts allocated by person A to the classes of purchased property:
- the amounts allocated by person B to the classes of purchased property:
- amounts that reflect the relative market value of the relevant class of purchased property, proportional to the other classes of purchased property.
A class of purchased property is treated as disposed of and acquired for the relevant allocated amount provided by subsections (3) to (6).
Person B’s deductions in relation to consideration for purchased property are not allocated to an income year, and are not included in person B’s annual total deductions for any tax year, except to the extent provided by this section.
Person B’s deductions in relation to consideration for purchased property are allocated to income years in accordance with section BD 4 (Allocation of deductions to particular income years), if allocation notification occurs in the income year that the purchased property is disposed of (the purchase year) or if the deductions are not pre-allocation deductions.
If subsections (1)(a) and (5) apply to person B and if allocation notification occurs in an income year after the purchase year, then pre-allocation deductions are allocated to the earliest year (the allocation year) for which person B’s return of income is not filed or due at the time of allocation notification. The allocation year may correspond to the purchase year, but the allocation year must not be earlier than the purchase year. Example: the purchase year for purchased property is 2025–26. 2027–28 is the income year that allocation notification occurs. At the time of allocation notification, person B’s return of income for 2026–27 is not filed or due. Consequently, pre-allocation deductions are allocated to the 2026–27 income year.
Subsection (6)(c) does not apply to an item of purchased property that is an item of depreciable property, if—
- the original cost of the item for person A is less than $10,000; and
- the total allocated amount for the item and for any identical property is less than $1 million; and
- the allocated amount for the item is—
- no greater than its original cost for person A; and
- no less than its tax book value.
- no greater than its original cost for person A; and
Subsection (7) does not apply to a class of purchased property described in subsection (1)(a)(i) or (ii) if—
- person A and person B are associated persons at the time of the disposal; and
- the relevant allocated amount provided by subsections (3) to (6) for the class of purchased property is less than the total market value of the items of purchased property in the class of purchased property at the time of the disposal.
This section overrides a provision of this Act that expressly requires the use of the market value for purchased property, to the extent to which subsection (7) treats the relevant class of purchased property as disposed of and acquired for an amount that is provided by this section.
In this section and section GC 20,—
- allocation notification means the earliest of the following:
- the time when person B’s notification of person B’s allocation is provided to the Commissioner in the form prescribed by the Commissioner:
- the time when the Commissioner’s notification of the Commissioner’s allocation under subsection (6) is provided to person B:
- the time when person B’s notification of person B’s allocation is provided to the Commissioner in the form prescribed by the Commissioner:
- pre-allocation deduction means person B’s deductions in relation to consideration for purchased property that, ignoring this section, would be allocated to an income year before the income year that allocation notification occurs:
- tax book value, for a class of property, means the total amount that person A uses or would use, for purchased property in the class of property, in calculating person A’s tax position for their income year in which the change in ownership of the purchased property occurs. The tax book value is adjusted, part-year, for a change in ownership that occurs part-year. Example: the tax book value of a financial arrangement is the consideration that would give an amount of income or expenditure under section EW 31 (Base price adjustment formula) equal to the income or expenditure that person A would have for the purchased property in the year of disposal for the period before the change in ownership of the purchased property (the part-year period) using the relevant spreading method for the purchased property for the part-year period, pro rata.
Notes
- Section GC 21: inserted, on , by section 83(1) (and see section 83(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
- Section GC 21(11B) heading: inserted, on , by section 84(1) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
- Section GC 21(11B): inserted, on , by section 84(1) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
- Section GC 21 list of defined terms associated person: inserted, on , by section 84(2) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).