Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Terminating provisions

CZ 25: Land and buildings as revenue account property affected by Canterbury earthquakes and replaced—insurance or compensation, Government purchase

You could also call this:

“Tax rules for replacing earthquake-damaged business property in Canterbury”

This law applies when you own buildings or land that you use to make money, and these properties were damaged by the Canterbury earthquakes. If you get insurance money or compensation for the damage, or if the government buys your property, this law explains how to handle the money you receive.

You can use this law if you plan to buy new property to replace what was damaged. The new property must be in the greater Christchurch area and you need to buy it by the end of the 2023-2024 tax year.

If you use this law, you don’t have to pay tax on all the money you receive right away. Instead, you can delay paying tax on some of it. This is called “suspended recovery income”.

You need to tell the tax office if you want to use this law. You must do this by certain dates and give them information about your damaged property and the new property you’re buying.

If you decide not to replace your property, or if it’s the 2023-2024 tax year and you haven’t replaced it yet, or if your business closes down, you’ll need to pay tax on the suspended recovery income.

This law helps you manage the tax on money you receive for earthquake-damaged property, giving you time to replace it before paying all the tax.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM4882020.

Topics:
Money and consumer rights > Taxes
Housing and property > Buying and selling homes
Business > Industry rules
Previous

CZ 24B: Employee benefits for North Island flooding events relief: not fringe benefits, or

“Tax-free employer benefits for North Island flood victims”

Next

CZ 25B: Land and buildings as revenue account property affected by Hurunui/Kaikōura earthquakes and replaced—insurance or compensation, or

“Tax relief for replacing earthquake-damaged property with insurance money”

Part C Income
Terminating provisions

CZ 25Land and buildings as revenue account property affected by Canterbury earthquakes and replaced—insurance or compensation, Government purchase

  1. This section applies for a person and an income year (the current year) before the 2024–25 income year when the person,—

  2. in or before the current year, derives for buildings or land (the affected property), all of which is revenue account property,—
    1. insurance or compensation, if a Canterbury earthquake as that term is defined in section 4 of the Canterbury Earthquake Recovery Act 2011 damages the land and damages each building, or the neighbourhood of the building, causing the building to be useless for the purpose of deriving income and consequently to be demolished or abandoned for later demolition:
      1. an amount from a purchase by the Crown from the person under section 91, 103, or 104 of the Greater Christchurch Regeneration Act 2016; and
      2. in the absence of this section, would have in or before the current year a total amount of income (the insurance income) under sections CB 6, CB 7, CB 12, CB 13, and CG 6 (which relate to income from certain disposals of land and from compensation for trading stock) from the consideration, compensation, or insurance for the affected property that exceeds the total amount of deductions under sections DB 23 and DB 27 (which relate to deductions for the cost or value of land) for the affected property; and
        1. plans, in the current year, to acquire property (the replacement property)—
          1. replacing affected property; and
            1. meeting the requirements of subsection (4); and
              1. having a cost exceeding the total amount of deductions under sections DB 23 and DB 27 for the affected property; and
              2. notifies the Commissioner under subsection (6) in relation to the affected property.

                1. The amount (the excess recovery) by which the insurance income referred to in subsection (1)(b) exceeds the deductions referred to in subsection (1)(b) is not income of the person except to the extent of the amount (the suspended recovery income) remaining after adjustment under subsection (3) that is attributed to an income year by subsection (5).

                2. If the person incurs expenditure (the replacement cost) to acquire replacement property,—

                3. for the purposes of determining the value of the replacement property for section EA 2 (Other revenue account property), the amount of the person's expenditure on the replacement property is reduced by—
                  1. the amount calculated by dividing the replacement cost by the total amount of deductions under sections DB 23 and DB 27 for the affected property and multiplying the result by the excess of the insurance income over the replacement cost, if the insurance income exceeds the replacement cost and the calculated amount is less than or equal to the amount of insurance income; or
                    1. the amount of the excess recovery, if the insurance income does not exceed the replacement cost or is less than the amount calculated in subparagraph (i); and
                    2. the amount of the suspended recovery income immediately before the expenditure is reduced by an amount equal to the reduction of expenditure under paragraph (a) for the purposes of section EA 2.

                      1. For an item of affected property, replacement property must be a building or land that is revenue account property—

                      2. acquired in or before the person's 2023–24 income year; and
                        1. located in greater Christchurch as that term is defined in section 4 of the Canterbury Earthquake Recovery Act 2011.

                          1. The person has an amount of income for the affected property in the current year equal to the amount of suspended recovery income when—

                          2. the current year ends, if the current year is the 2023–24 income year:
                            1. in the current year, the person decides not to replace the affected property:
                              1. in the current year, the person goes into liquidation or becomes bankrupt.

                                1. A person choosing to rely on this section to suspend in a current year the recognition of suspended recovery income from the insurance for affected property must notify the Commissioner—

                                2. by the later of 31 January 2012 and the date on which the return of income is filed for the earliest income year (the estimate year) in which the amount of the insurance for the affected property can be reasonably estimated; and
                                  1. if the current year is after the estimate year,—
                                    1. for each income year between the estimate year and the current year, by the date on which the return of income is filed for that income year; and
                                      1. for the current year, by the date on which the return of income is filed for the current year.

                                      2. A notice under subsection (6) must—

                                      3. describe the affected property; and
                                        1. give details of replacement property acquired in the current year to replace, in full or in part, the affected property; and
                                          1. give the cost of the replacement property and the reduction under subsection (3) of that cost for the purposes of section EA 2; and
                                            1. give the amount, for the affected property, of the income from insurance or compensation remaining suspended under this section at the end of the current year.

                                              1. This section overrides section CG 6.

                                              Notes
                                              • Section CZ 25: inserted (with effect on 4 September 2010), on , by section 19 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                                              • Section CZ 25(1): amended (with effect on 4 September 2010), on , by section 147(1) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                              • Section CZ 25(1): amended (with effect on 4 September 2010), on , by section 28(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                              • Section CZ 25(1)(a)(i): amended (with effect on 4 September 2010), on , by section 28(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                              • Section CZ 25(1)(a)(ii): amended (with effect on 19 April 2016), on , by section 10(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                                              • Section CZ 25(1)(a)(ii): amended (with effect on 4 September 2010), on , by section 28(3) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                              • Section CZ 25(1)(b): replaced (with effect on 4 September 2010), on , by section 28(5) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                              • Section CZ 25(1)(c): replaced (with effect on 4 September 2010), on , by section 28(6) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                              • Section CZ 25(1)(d): amended, on , by section 10(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                                              • Section CZ 25(2): amended (with effect on 4 September 2010), on , by section 28(7) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                              • Section CZ 25(3)(a): replaced (with effect on 4 September 2010), on , by section 28(8) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                              • Section CZ 25(4)(a): amended (with effect on 4 September 2010), on , by section 147(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                              • Section CZ 25(4)(a): amended (with effect on 4 September 2010), on , by section 28(9) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                              • Section CZ 25(5) heading: amended (with effect on 4 September 2010), on , by section 147(3)(a) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                              • Section CZ 25(5) heading: amended (with effect on 4 September 2010), on , by section 28(10) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                              • Section CZ 25(5)(a): amended (with effect on 4 September 2010), on , by section 147(3)(b) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                              • Section CZ 25(5)(a): amended (with effect on 4 September 2010), on , by section 28(11) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                              • Section CZ 25(6): amended, on , by section 10(3) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                                              • Section CZ 25 list of defined terms notify: inserted, on , by section 10(4) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).