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Income Tax Act 2007

Core provisions - Income, deductions, and timing

BD 3: Allocation of income to particular income years

You could also call this:

“Rules for assigning income to specific tax years”

When you earn money, you need to assign it to a specific income year. This is called ‘allocation’. You usually allocate the money to the year you received it, but sometimes other rules might apply.

When figuring out when you received the money, you need to think about how the courts have decided similar cases. Some people have to record their income as soon as they earn it, even if they haven’t received the money yet. Others only need to record it when they actually get the cash. The courts have also explained what ‘receiving’ income means in general.

If you haven’t received some income before, but it’s put into your account or used for your benefit, it’s treated as if you’ve received it then.

There are special rules in Part E of the law that might change when or how you allocate income. These rules might directly change when you allocate income, or they might change it as part of working out how much income you have.

Remember, you can only allocate each bit of income once. You can’t count the same money in more than one year.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512371.

Topics:
Money and consumer rights > Taxes
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Part B Core provisions
Income, deductions, and timing

BD 3Allocation of income to particular income years

  1. Every amount of income must be allocated to an income year under this section.

  2. An amount of income is allocated to the income year in which the amount is derived, unless a provision in any of Parts C or E to I provides for allocation on another basis.

  3. When the time of derivation of an amount of income is being determined, regard must be had to case law, which—

  4. requires some people to recognise income on an accrual basis; and
    1. requires other people to recognise income on a cash basis; and
      1. more generally, defines the concept of derivation.

        1. Despite subsection (3), income that has not previously been derived by a person is treated as being derived when it is credited in their account or, in some other way, dealt with in their interest or on their behalf.

        2. Part E (Timing and quantifying rules) contains a number of provisions that—

        3. specifically modify the allocation of income or have the effect of modifying the allocation of income; or
          1. allocate income as part of the process of quantifying it.

            1. An amount of income may be allocated only once.

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