Income Tax Act 2007

Avoidance and non-market transactions - Market value substituted

GC 20: Effect of purchase price allocation agreement

You could also call this:

"How sale prices are divided among different types of property when selling something"

When you sell something to someone, it can be made up of different types of property. You and the buyer must agree on how much of the sale price goes to each type of property. You record this agreement in a document before you or the buyer file your tax returns. If you and the buyer agree on the amounts, the property is treated as sold for that amount. But if the tax commissioner thinks the amounts do not reflect the property's true value, they can change them. There is an exception for items that cost less than $10,000 and are allocated less than $1 million in total. In this case, the tax commissioner cannot change the amount if it is between the original cost and the tax book value, as described in section GC 21(13)(c).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS519816.

This page was last updated on 29 January 2026 — View changes

Topics:

Money and consumer rights > TaxesBusiness > Industry rules

GC 19: Sections GC 15 to GC 18 and financial arrangements entered before application period, or

"Financial arrangements before July 2018 are subject to specific rules"

GC 21: Purchase price allocation required: no agreement, or

"Working out prices for tax when selling multiple things at once"

Part GAvoidance and non-market transactions
Market value substituted

GC 20Effect of purchase price allocation 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)—
1. trading stock, other than timber or a right to take timber:
2. timber or a right to take timber:
3. depreciable property, other than buildings:
4. buildings that are depreciable property:
5. financial arrangements:
6. purchased property for which the disposal does not give rise to assessable income for person A or deductions for person B; and
person A and person B have agreed, and recorded in a document, amounts of the total consideration allocated to any of the classes of purchased property before the earlier of—
1. the day person A files a return of income in relation to their tax position for the purchased property:
2. the day person B files a return of income in relation to their tax position for the purchased property.

A class of purchased property—
is treated as disposed of and acquired for the relevant allocated amount; or
may be treated by the Commissioner as disposed of and acquired for an amount that reflects the relative market value of the class of purchased property, proportional to the other classes of purchased property, if the Commissioner considers the allocated amount does not reflect that value.

Subsection (2)(b) 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—
1. no greater than its original cost for person A; and
2. no less than its tax book value as described in section GC 21(13)(c).

Notes

Section GC 20: inserted, on 1 July 2021, 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).