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EI 7: Leases: income derived in anticipation
or “Spreading advance income from lease-related payments over multiple years”
You could also call this:

“How to spread income from selling land to the government over several years”

When you sell your land to the Crown, you can choose to spread out the money you get over four years. You can split the money into four equal parts. You put one part in the year you sell the land, and one part in each of the next three years.

If you spread out the money, you also need to spread out any costs you can claim for the land. You do this in the same way as you spread out the money.

To spread out your money, you or someone else needs to ask the tax office within one year after the end of the tax year when you sold the land. You might get more time if the tax office agrees. You must make sure you pay all the tax on this money. The tax office can cancel this arrangement at any time.

If the tax office cancels the arrangement, all the money and costs go into the year before the cancellation. But this doesn’t change any money or costs already put into earlier years.

If you sold land to the Crown before the 2015-16 tax year and still have some money left to spread out, you need to do something different. If it’s been more than three years since you sold the land, put all the leftover money in the 2015-16 year. If it hasn’t been three years yet, split the leftover money equally between the years left until three years is up, but only use years after 2014-15.

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Next up: EI 9: Matching rule for employment income of shareholder-employee

or “When shareholder-employees count their income from the company for tax”
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Part E Timing 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).