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EI 1: Spreading backward of income from timber
or “Dividing timber sale income across multiple tax years”
You could also call this:

“How inflation affects money you've lent”

When you lend money, sometimes the amount you’re owed can change based on inflation. This law explains how to handle these changes.

If you’ve lent money and the amount you’re owed has increased due to inflation by the end of your income year, here’s what happens:

The increase is treated as if the borrower has added it to what they owe you. This happens on the day after the inflation index becomes public, or on the last day the index was calculated before the end of your income year if it wasn’t calculated at the end.

However, this increase isn’t counted if the borrower has already paid back the money, if they’ve already paid you the extra amount, or if it’s just making up for a decrease in what they owed you in an earlier year.

This rule applies when the amount you’re owed is tied to New Zealand’s inflation rate and has changed since you first lent the money or since the end of your last income year.

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Next up: EI 3: Assigning or granting copyright

or “Spreading income from selling or licensing copyright for creative works”
Next

Part E Timing and quantifying rules
Spreading of specific income

EI 2Interest from inflation-indexed instruments

  1. This section applies when—

  2. an amount of money lent is outstanding at the end of the lender’s current income year; and
    1. an amount is payable to the lender for the money lent, in a future income year of the lender; and
      1. the amount payable is determined by a fixed relationship to 1 or more indices of general price inflation in New Zealand; and
        1. the amount payable that has accrued at the end of the lender’s current income year differs from any amount payable that had accrued—
          1. at the time the money was lent, if it was lent during the lender’s current income year; or
            1. at the end of the lender’s previous income year, if it was lent before the lender’s current income year.

            2. If the difference is an increase, the increase is treated as having been credited in account and capitalised by the borrower for the benefit of the lender on—

            3. the day following the day on which the level of the relevant index at the end of the lender’s current income year becomes public knowledge; or
              1. if the level of the relevant index is not calculated for the end of the lender’s current income year, the last date before the end of the income year for which the level is calculated.
                  1. This subsection is overridden by subsection (3).

                1. An increase is not treated as having been credited to the extent to which—

                2. the money lent has been repaid:
                  1. an amount on account of the increase has already been paid to the lender:
                    1. the increase represents a recovery of a decrease in the amount payable over an earlier income year of the lender.

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