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Income Tax Act 2007

Timing and quantifying rules - Spreading of specific income

EI 8: Disposal of land to the Crown

You could also call this:

"Selling land to the government: how to spread the income over several years"

Illustration for Income Tax Act 2007

When you sell land to the Crown, you get income from it. You can choose to split this income into four equal parts. You can then allocate one part to the year you got the income and the rest to the next three years. If you allocate income to more than one year, you must also allocate part of any deduction for the land's cost. The deduction must be in the same proportion as the allocated income. You or someone else must apply to the Commissioner to do this. The application must be made within one year after the end of the tax year or a longer time if the Commissioner agrees. If the Commissioner cancels the allocation, the whole income or deduction goes to the year before the cancellation. But this does not affect income or deductions already allocated to earlier years. If you got income from selling land to the Crown before the 2015-16 year and some of it is still unallocated, you must allocate it to the 2015-16 year or later years. You can find more information about this in the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 and the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515079.

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Money and consumer rights > TaxesHousing and property > Buying and selling homesHousing and property > Land use
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Part ETiming and quantifying rules
Spreading of specific income

EI 8Disposal of land to the Crown

  1. This section applies when a person derives income from disposing of any of their land to the Crown.

  2. The person may choose to—

  3. divide the income into 4 equal portions; and
    1. allocate a portion to the income year in which they derive the amount; and
      1. similarly allocate a portion to each of the next 3 income years.

        1. If the person allocates income to 2 or more income years, they must allocate part of any deduction allowed for the cost of the land to the same income years. The part must bear the same proportion to the total deduction as the allocated income bears to the total amount of income.

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

        3. the person, or another person for them, must apply to the Commissioner:
          1. the application must be made within 1 year after the end of the tax year in which the person derives the income or within a longer time if the Commissioner agrees:
            1. the person must arrange to meet all income tax liabilities relating to the income:
              1. the Commissioner may cancel the allocation at any time.

                1. If the Commissioner cancels the allocation,—

                2. the whole of the income or deduction, as applicable, is allocated to the income year before the income year in which the cancellation occurs:
                  1. the cancellation does not affect income or a deduction that has been allocated to an earlier income year.

                    1. Despite subsection (2), when a person has derived an amount of income to which this section applies before the 2015–16 income year, and all or part of that amount remains unallocated at the start of that income year, the person must—

                    2. if the period of 3 income years after the income year of derivation has expired before the start of the 2015–16 income year, allocate the remaining amount to the 2015–16 income year; or
                      1. if the period of 3 income years after the income year of derivation has not expired before the start of the 2015–16 income year, divide the remaining amount into equal portions based on the number of income years left in the period, and allocate a portion to each of those income years falling after the end of the 2014–15 income year.

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                        Notes
                        • Section EI 8(2): replaced, on (applying for the 2015–16 and later income years), by section 72(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                        • Section EI 8(4)(a): replaced, on , by section 28(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                        • Section EI 8(6) heading: inserted, on (applying for the 2015–16 and later income years), by section 72(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                        • Section EI 8(6): inserted, on (applying for the 2015–16 and later income years), by section 72(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
                        • Section EI 8 list of defined terms apply: inserted, on , by section 28(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).