Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Income from holding property (excluding equity)

CC 1C: Consideration for agreement to surrender leasehold estate or terminate licence

You could also call this:

“Money received for ending a land lease or licence early may be taxable income”

You need to know about a rule for when someone gets money for agreeing to end a lease or licence on land they own. This applies when you own land and have given someone else the right to use it through a lease or licence. If you then agree to end that lease or licence early and get paid for it, that money is usually counted as income for you.

However, there’s an exception to this rule. If you’re a regular person (not a company) who’s renting out a home or letting someone live there under a licence, and you don’t claim the costs of that property as a business expense, then the money you get for ending the lease or licence early isn’t counted as income.

This rule is part of the Income Tax Act 2007, which sets out how different types of money are treated for tax purposes in New Zealand.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM5490810.

Topics:
Money and consumer rights > Taxes
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CC 1B: Consideration relating to grant, renewal, extension, or transfer of leasehold estate or licence, or

“Money received for land rights: when it counts as income”

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“Money received when tenant breaches repair agreement”

Part C Income
Income from holding property (excluding equity)

CC 1CConsideration for agreement to surrender leasehold estate or terminate licence

  1. This section applies when—

  2. a person (the payee) is the owner of—
    1. an estate in land from which is granted a right (the land right) that is a leasehold estate not including a perpetual right of renewal, or is a licence to use land:
      1. the land right; and
      2. derives an amount as consideration for the agreement by the payee to the surrender or termination of the land right.

        1. The amount is income of the payee.

        2. The amount is not income if the payee is a natural person and derives the amount as a tenant or licensee of residential premises whose expenditure on the residential premises does not meet the requirements of the general permission.

        Notes
        • Section CC 1C: inserted (with effect on 1 April 2013 and applying to an amount that is derived on or after that date), on , by section 7(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
        • Section CC 1C(1): replaced (with effect on 1 April 2013 and applying to an amount derived on or after that date), on , by section 11(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).