Income Tax Act 2007

Income - Recoveries

CG 2: Remitted amounts

You could also call this:

"Money you don't have to pay back is still considered income"

When you are allowed to deduct an amount you have to pay, and you don't have to pay it later, that amount is income. This happens when your liability is remitted or cancelled, and it's not a dividend. You have to include this income in the year the remission or cancellation happens. If you are discharged from a liability without fully paying it, or it's cancelled under the Insolvency Act 2006, that's considered remitted or cancelled. The same applies if a liability is cancelled under the Companies Act 1993, or if you make a deal with your creditors to pay less. A liability that's too old to be enforced is also considered cancelled. Some other rules, like sections CG 2C to CG 2E, can override this rule. You can find more information about when a base price adjustment is required in section EW 29, or about the Insolvency Act 2006, by following the links to section EW 29 or the Insolvency Act 2006. Other laws, like the Companies Act 1993, also apply, which you can find at Companies Act 1993.

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Topics:

Money and consumer rights > Taxes

CG 1: Amount of depreciation recovery income, or

"Money from selling depreciated items counts as income"

CG 2B: Remitted amounts on discharge from bankruptcy, or

"Removed: Tax rules for money forgiven when leaving bankruptcy"

Part CIncome
Recoveries

CG 2Remitted amounts

This section applies when—
a person is allowed a deduction in an income year of an amount that the person is liable to pay; and
the person’s liability for the amount is later remitted or cancelled, wholly or partly; and
the remission or cancellation is not a dividend; and
the person is not required to calculate a base price adjustment by section EW 29 (When calculation of base price adjustment required).

The amount to which the remission or cancellation applies is income of the person.
The income is allocated to the income year in which the remission or cancellation occurs.
Remission or cancellation occurs, for the purposes of this section, in 1 of the following ways:
a liability is remitted to the extent to which the person is discharged from it without fully adequate consideration in money or money’s worth:
a liability is cancelled to the extent to which the person is released from it under the Insolvency Act 2006, except by—
1. being discharged from bankruptcy:
2. being released under Part 5, other than subpart 1, of the Insolvency Act 2006 from liability for each debt that is a provable debt under that Act and is not a debt of a type for which the person’s liability is specifically preserved by that Act:
a liability is cancelled to the extent to which the person is released from it under the Companies Act 1993 or the laws of a country or territory other than New Zealand:
a liability is cancelled to the extent to which the person is released from it by a deed or agreement of composition with the person’s creditors:
a liability is cancelled to the extent to which it is irrecoverable or unenforceable through lapse of time.

Sections CG 2C to CG 2E override this section.

Compare

2004 No 35 s CG 2

Notes

Section CG 2(4)(ab): inserted, on 30 March 2017, by section 26(1) (and see section 26(4)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CG 2(4)(b): amended, on 30 March 2017, by section 26(2) (and see section 26(4)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CG 2(5) heading: replaced, on 30 March 2017), by section 26(3) (and see section 26(4)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section CG 2(5): replaced, on 30 March 2017, by section 26(3) (and see section 26(4)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).