5 benefits of specialised valuations for plant and equipment

Updated tax rules that apply to the sale of commercial assets have been in effect since July 2021. So, what’s changed? Instead of purchasers and sellers taking their own position on tax values, the amended act requires both parties to agree to the PPA in writing and duplicate these values in their tax returns. These allocation rules are now obligatory for the sale and purchase of mixed supplies with a purchase price of $1,000,000 (including GST) or higher. Previously, there was no legislative requirement for parties to adopt the same allocation.

In the event a PPA is not agreed upon, the vendor has the first right to decide the asset value. In that scenario, the vendor has three months following the change in ownership of the assets to notify the purchaser and Inland Revenue of the PPA.

“In most instances, when the value of plant and equipment is not accurately determined, the purchaser in a transaction is most commonly disadvantaged,” says Tony Pratt, Head of Plant, Equipment, & Infrastructure Valuation Advisory at JLL NZ.

Below are just a few reasons why valuing plant and equipment accurately is essential to your business.

The transaction process can be time-consuming and tedious for both the buyer and the seller. Time is always of the essence and unforeseen delays frustrate all parties involved and could jeopardise the sale. A drawn-out transaction can also lead to mounting service costs such as deal advisors, lawyers, and accountants. A definitive PPA is just one of the ways to avoid surprises late in the piece.

The challenges that can arise from an incorrect valuation highlight the importance of seeking independent, professional valuation advice early in the transaction cycle. 

Alongside the expertise of a global network and 35 years of local experience, JLL has New Zealand’s largest team of specialist plant and machinery valuers. This specific knowledge ensures all valuations and assumptions are representative of the industry, competition, and market conditions.

As one of the leading valuation firms, JLL can assess and determine fair PPAs and help you to understand all of the conflicting interests and tax implications pertaining specifically to plant and equipment acquisitions.