Purchase Price Allocation Template: Asset Sale of Business in Australia (Free Download)

When you buy a business as an asset sale in Australia, you and the seller must agree on how the total purchase price is divided across the different assets you're acquiring. This is called purchase price allocation (PPA), and it's not just an accounting formality — it directly affects how much tax both parties pay, and since July 2021 the ATO has mandatory rules about how it works.

Most first-time buyers hand this off entirely to their accountant, which is fine. But if you don't understand the basics, you'll end up with a PPA that's convenient for the seller's tax position rather than yours. And since you're the one writing the cheque, that's a problem worth understanding.

This free template gives you a structured framework to work through the allocation with your accountant before the SPA is finalised — so you know what you're agreeing to and why.

What Is Purchase Price Allocation?

Purchase price allocation is the process of breaking down the total business purchase price into separate values for each asset class being transferred — things like plant and equipment, trading stock, goodwill, intellectual property, restraint of trade payments, and customer lists.

Each asset class has different tax treatment for both buyer and seller. The allocation directly determines:

• What the seller pays CGT or income tax on
• What the buyer can depreciate, deduct, or write off
• Whether the ATO views the allocation as arm's-length and legitimate

The ATO rules (introduced 1 July 2021) require that both buyer and seller agree on the same allocation and use it consistently in their respective tax returns. If they can't agree — or don't document it — the ATO can impose its own allocation, which is unlikely to favour either party. You need a written allocation agreed before settlement.

For a deeper look at the choice between buying assets vs shares (and why that matters before you get to PPA), see the asset vs share sale breakdown.

Why the Allocation Matters More Than Most Buyers Realise

Here's the thing sellers know that buyers often don't: the allocation of the purchase price is negotiable, and what's good for the seller is usually the opposite of what's good for you.

Sellers typically want to maximise goodwill (which attracts the CGT 50% discount if they've held the business for more than 12 months) and minimise trading stock and plant (which are taxed as ordinary income). Buyers want the opposite — more in depreciating assets like plant and equipment, so you can claim depreciation deductions faster.

I've seen a deal where the seller's accountant drafted the PPA schedule in the SPA with the entire excess (above tangible asset values) allocated to goodwill. The buyer's solicitor didn't push back — the buyer's accountant only saw it after signing. Nobody did anything wrong, but the buyer left a meaningful tax advantage on the table because they didn't engage with the PPA at the negotiation stage.

This is covered as part of the valuation and deal structure work in Module 4 of the Playbook.

The Main Asset Categories (and Who Benefits from What)

Here's a quick guide to the common categories before you see the template:

Trading stock: Inventory on hand. Ordinary income for seller; immediate deduction or cost of goods for buyer. Usually at cost or market value.

Plant and equipment: Vehicles, machinery, tools. Seller pays tax on the balancing adjustment (difference between written-down book value and allocated price). Buyer claims depreciation from the allocated value.

Goodwill: The premium above identifiable assets — brand, customer relationships, reputation. CGT asset for seller (50% discount after 12 months, or small business CGT concessions may apply). For buyers: not depreciable under standard rules, though some intangibles attached to goodwill may be amortisable.

Intellectual property: Trademarks, designs, software. Depreciating asset for both parties over effective life.

Customer lists: May be classified as depreciating IP or as part of goodwill — the classification matters.

Restraint of trade payments: If the SPA includes a non-compete clause with a specific dollar value, this is ordinary income for the seller. For the buyer, it may be deductible over the restraint period. Worth isolating explicitly.

Work in progress: Uncompleted jobs or contracts. Usually taxed as income for the seller; recognised as a liability or deducted cost for the buyer.

Want to work through the full allocation before your SPA is signed? The template below gives you a fill-in worksheet covering all major asset categories, with the buyer's tax implications for each. Grab it free.