5 benefits of specialised valuations for plant and equipment

Notwithstanding your industry, an accurate and fair purchase price needs to be assigned to all plant and equipment assets; a process referred to as a purchase price allocation or purchase cost allocation.

From office, industrial, and hospitality, to engineering and construction, plant and equipment assets are utilised across all sectors. As these assets can depreciate faster than others, they call for regular, more complex professional valuations.

Increased exposure to tax risk is the key issue that arises for purchasers, due to the seller allocating values in the interest of reducing their own tax liability. These competing interests can lead to a purchaser’s future depreciation deductions, and corresponding tax savings, being more restricted. Often, this is a circumstance not realised until it’s too late. Not complying with these rules can lead to future penalties.

“It’s typically when clients are audited 3-5 years following their transactions that they’re consequently caught out and lumped with big tax bills,” explains Tony.

Being proactive about risk management is critical to maintaining business as usual. With a valuation for your plant and machinery, you can see potential financial and logistical risks and learn how to minimise them. In an uncertain economic climate, managing risk is top of mind for any executive team.

Regardless of the outcome of the upcoming national election later in 2023, it appears both major parties are intent on rolling back the tax changes to commercial properties introduced as part of the COVID response measures. This means no further depreciation of the building structure, making it critical that you maximise your tax benefits by correctly identifying the market values of your plant, equipment, and fitout.