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Income Tax Act 2007

Timing and quantifying rules - Terminating provisions

EZ 1: Life insurers acquiring property before 1 April 1988

You could also call this:

“Tax deductions for life insurers selling certain pre-1988 property”

This law is about how life insurance companies can get a tax deduction for certain property they bought before 1 April 1988. Here’s how it works:

You can get this deduction when you sell the property. The amount you can deduct depends on a special calculation. This calculation looks at how much of your insurance business was for superannuation, some mortgage insurance, and annuities compared to your total insurance business at the end of the 1987-88 tax year.

The calculation also considers the value of the property. If you bought the property before or during the 1982-83 tax year, you use its market value on 1 April 1988 minus a special base cost. If you bought it after that, but it’s not a financial arrangement, you use its market value on 1 April 1988 minus what you paid for it. If it is a financial arrangement bought after 1982-83, you use a special calculation as if the arrangement ended on 1 April 1988.

You get to claim this deduction in the tax year when you sell the property.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515974.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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“ Non-resident insurers can apply to be treated as NZ residents for tax purposes ”

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EZ 2: Deductions for disposal of property: 1982–83 and 1989–90 income years, or

“Rules for deductions when selling long-held property”

Part E Timing and quantifying rules
Terminating provisions

EZ 1Life insurers acquiring property before 1 April 1988

  1. This section applies when section DZ 2 (Life insurers acquiring property before 1 April 1988) applies.

  2. The amount of the deduction is calculated using the formula—

    (specific liability ÷ total liability) × property sum.

    Where:

    • The items in the formula are defined in subsections (4) to (9).

    • Specific liability is the amount in the life insurer’s total liability on the last day of the 1987–88 income year for the following matters covered by the life insurer’s Life Insurance Fund:

    • superannuation policies; and
      1. pre-1983 mortgage repayment insurance policies; and
        1. annuities that have been granted.

          1. Total liability is the life insurer’s liability for life insurance policies on the last day of the 1987–88 income year.

          2. The property sum is calculated under whichever is relevant of subsections (7) to (9).

          3. For property acquired on or before the last day of the 1982–83 income year, the property sum is calculated by subtracting the specified base cost for 1983 income year property from the market value of the property on 1 April 1988.

          4. For property acquired after the end of the 1982–83 income year that is not a financial arrangement, the property sum is calculated by subtracting the cost price or acquisition value of the property from the market value of the property on 1 April 1988.

          5. For property acquired after the end of the 1982–83 income year that is a financial arrangement, the property sum is the base price adjustment for the arrangement, calculated as if the arrangement had matured on 1 April 1988 but using the formula in section EW 31 (Base price adjustment formula).

          6. The life insurer is allowed the deduction in the income year in which they dispose of the property.

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