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Income Tax Act 2007

Timing and quantifying rules - Spreading of specific income

EI 5: Amount paid to lessor for non-compliance with covenant for repair

You could also call this:

“Spreading repair money from tenants who break lease agreements”

If you’re a lessor and you get money because someone didn’t follow the rules about fixing things, this is what you need to know. You can choose to spread this money over up to five years. This includes the year you got the money and the next four years. If you don’t choose how to spread it, all the money will go to the fourth year after you got it.

If you want to spread the money, you need to tell the tax office how you’re doing it. You have to do this when you file your tax return for the year you’re putting the money in, or later if the tax office says it’s okay. Once you decide how to spread the money, you can’t change your mind.

This rule is different from what it says in section CC 2(2), and section EI 6 can change how this rule works.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515073.

Topics:
Housing and property > Renting
Money and consumer rights > Taxes
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EI 4B: Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence, or

“Rules for payments related to land use agreements”

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EI 6: Amount paid for non-compliance: when lessor ceases to own land, or

“Landlords must pay remaining spread-out income when selling land early”

Part E Timing and quantifying rules
Spreading of specific income

EI 5Amount paid to lessor for non-compliance with covenant for repair

  1. This section applies when a lessor receives an amount of income under section CC 2 (Non-compliance with covenant for repair).

  2. The lessor may choose to allocate the income between the income year in which they receive the amount and any 1 or more of the following 4 income years.

  3. Any part of the amount that the lessor does not allocate as described in subsection (2) is allocated to the fourth income year following the income year in which they receive the amount.

  4. The following provisions apply to an allocation for the purposes of subsection (2):

  5. the lessor must give a notice to the Commissioner that specifies how the income has been allocated; and
    1. the lessor must give the notice within the time required to file a return of income for the income year to which the income is allocated or within a longer time if the Commissioner agrees; and
      1. the lessor must not revoke the election.

        1. This section overrides section CC 2(2) and is overridden by section EI 6.

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