The overall price is clear, but the asset schedule is not
Illustrative composite client situation: a New Zealand buyer and seller are discussing an asset sale that includes trading stock, equipment and goodwill. They have one overall price in mind, but no supported allocation between the assets. The seller asks, “Can our accountants work out the split when the tax returns are prepared?” This is not a real Pillar transaction or a result achieved by Pillar. No amount or allocation is proposed.
It is useful to bring that question forward. An overall price can be commercially understandable while leaving important tax and evidence questions unresolved. The same asset schedule needs to be understood by both parties and their advisers before it becomes a filing position.
Confirm what is actually being sold
Inland Revenue distinguishes selling business assets from selling shares. This article concerns an asset-sale proposal. A share sale needs a different review; calling either transaction a “business sale” does not settle its treatment.
Read the proposed agreement with the asset list beside it. Note which stock, equipment, rights or other assets transfer, what stays with the seller, and whether any items are leased or owned by someone else. Confirm which party owns each item. Record whether receivables, cash or liabilities are included rather than assuming that everything in the accounts transfers.
The lawyer should confirm the legal perimeter and contract terms. The accountant needs that perimeter to understand which accounting and tax records are relevant. A total from the latest balance sheet is not a substitute for a schedule of the proposed assets.
Put evidence beside each proposed asset class
Inland Revenue’s allocation guidance separates taxable, depreciable and non-taxable assets and calls for market-value-based allocation. The tax treatment of an actual item still needs confirmation. An accounting book value or a balancing amount labelled “goodwill” is not, by itself, market-value support.
Prepare a working schedule showing the item or class, owner, source record, record date, book or tax value where available, and any market-value evidence. For stock, the useful starting records may be the stock list and count date; for equipment, the asset register, condition and ownership records. Identify what the proposed goodwill relates to and what supporting information exists, without assuming a tax classification or deriving it from an unexplained remainder.
Flag missing records and assumptions openly. A valuation specialist may need to assess particular assets or a defined business interest. The purpose, date and subject of that instruction should be clear before someone is asked for a value.
The dates matter before the returns are filed
Inland Revenue says an agreed allocation should be documented before either party files the income tax return covering the sale. Keep the allocation and its supporting schedule with the agreement, and record the agreement date, settlement date and each party’s relevant filing status.
If agreement is missing, tell the advisers promptly. The same guidance sets out seller-first and later buyer notification rules where specified thresholds apply. Whether those rules apply, and which dates control them, needs a review of the actual transaction. This article is not a deadline calculator. Silence or separate tax-return entries should not be treated as a documented agreement.
Inland Revenue’s asset-sale tax guidance also covers GST considerations. A proposed going-concern sale does not automatically establish zero-rating: the conditions and contract need a separate check. Allocation, income tax and GST questions should be brought to the advisers together.
Our buyer financial due-diligence guide tests a seller’s profit and the purchase perimeter. This article focuses on the evidence supporting the price split. Pillar’s tax and compliance service and business valuations and transaction support can help define the financial review alongside the lawyer’s work.
For a first conversation with Pillar, prepare the proposed agreement, included and excluded asset list, stock records, asset register, available market evidence, agreement and settlement dates, and any existing allocation or filing. A Pillar accountant should verify the tax position on the actual records; the parties retain their commercial decisions and the lawyer confirms the legal terms.