Orchard and Rural Property Transactions and Tax Considerations
There have been changes around the tax opportunities available when acquiring orchards and rural properties which need to be considered at the time of presenting a Sale and Purchase Agreement.
What we need to see in a Sale and Purchase Agreement is:
- A market valuation identified for house and curtilage
- A market valuation identified for Zespri G3 licenses
- The value that assets are acquired or disposed of
- Unmortised development expenditure
- A value that the land was acquired and disposed of
The value of the acquisition or disposition in a Sale & Purchase Agreement could have significant implications as purchasers will want to value assets to maximise their tax deduction, whereas sellers are inclined to value assets to reduce their tax exposure. Tax rules require values to be at market value.
By stipulating the values, this eliminates the risk that the vendor and the purchaser could have different values for tax purposes and therefore take a different tax approach, as the values are agreed at the time of the property transaction taking place. This is extremely helpful in an IRD audit too.
Zespri G3 licenses are able to be amortised over the life of the intangible asset from the date of purchase until the expiry date in 2039. It is therefore important to have included in the Sale and Purchase Agreement a market value of the licenses acquired or disposed of for the purposes of determining the tax.
Our advice is to talk to all your professional advisors before signing a Sale and Purchase Agreement. By doing so, you provide us with the opportunity to consider our specialist areas and work together at one time for you.