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CC 1C: Consideration for agreement to surrender leasehold estate or terminate licence
or “Money received for ending a land lease or licence early may be taxable income”
You could also call this:

“Money received when tenant breaches repair agreement”

If you’re renting out land to someone, and they don’t follow the rules about taking care of the land or fixing things on it, you might get some money from them. This money is called income for you, the person who owns the land.

You get this money because the person renting from you didn’t do what they promised in the lease agreement. They might not have looked after the land properly or didn’t fix things that needed fixing.

When you get this money, it counts as part of your income for that year. This means you need to include it when you’re working out your taxes for the year you received the money.

But there are some special rules about when you count this money as income. These rules are explained in other parts of the law called sections EI 5 and EI 6. These sections talk about what happens if you stop owning the land or if you use the money to fix things yourself.

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Next up: CC 3: Financial arrangements

or “Income from financial arrangements and debt forgiveness for trustees”
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Part C Income
Income from holding property (excluding equity)

CC 2Non-compliance with covenant for repair

  1. This section applies when a person who is a lessor of land derives an amount for non-compliance by the lessee with an obligation under a lease of the land—

  2. to maintain the land; or
    1. to make repairs to improvements on the land.

      1. The amount is income of the lessor.

      2. The income is allocated to the income year in which the lessor receives the amount.

      3. Subsection (3) is overridden by sections EI 5 (Amount paid to lessor for non-compliance with covenant for repair) and EI 6 (Amount paid for non-compliance: when lessor ceases to own land).

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