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Income Tax Act 2007

Income - Recoveries

CG 5B: Receipts from insurance, indemnity, or compensation for interruption or impairment of business activities

You could also call this:

“Insurance or compensation for lost business income”

If you receive money from insurance, compensation, or an indemnity because something interrupted or impaired your business activities, this is what you need to know:

The money you get might be counted as income. It’s counted as income if it replaces money you or someone else would have earned if the interruption or impairment hadn’t happened. This applies even if someone else gave you the right to receive the money.

You need to report this income in your tax return. You should report it in the tax year that the replaced income relates to. But if that’s not possible, you should report it in whichever of these comes first:

  1. The tax year when you received the money
  2. The tax year when you could reasonably work out how much the money would be

Remember, this only applies to money that replaces income you lost because of the interruption or impairment to your business activities.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3994900.

Topics:
Money and consumer rights > Taxes
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CG 6: Receipts from insurance, indemnity, or compensation for trading stock, or

“Money received for lost or damaged trading stock or production items may be taxable income”

Part C Income
Recoveries

CG 5BReceipts from insurance, indemnity, or compensation for interruption or impairment of business activities

  1. This section applies when a person receives an amount of insurance, indemnity, or compensation for an interruption or impairment of business activities resulting from an event.

  2. The amount is income of the person to the extent to which it is attributable to income (the replaced income) that—

  3. the person would have derived if not for the event:
    1. another person, who assigned the right to receive the amount to the person, would have derived if not for the event.

      1. The income is allocated to the later of—

      2. the income year to which the replaced income relates:
        1. the earlier of—
          1. the income year in which the amount is received:
            1. the income year in which the amount is reasonably able to be estimated.

            Notes
            • Section CG 5B: inserted (with effect on 4 September 2010), on , by section 5 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
            • Section CG 5B(2): replaced (with effect on 1 April 2011), on , by section 45(1) (and see section 45(2) for application) of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).
            • Section CG 5B(3): replaced (with effect on 4 September 2010), on , by section 13(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).