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Income Tax Act 2007

Timing and quantifying rules - Terminating provisions - Entry to new life insurance regime: transitional and miscellaneous provisions

EZ 79: Insurance for Hurunui/Kaikōura earthquake damage of property: limit on depreciation recovery income

You could also call this:

“Limits on tax for insurance payouts from Hurunui/Kaikōura earthquake property damage”

This section of the law is about what happens when your property is damaged by the Hurunui/Kaikōura earthquake and you get money from insurance. It applies to you if:

  • Your property was damaged by the Hurunui/Kaikōura earthquake.
  • You’re getting insurance money for the damage.
  • The damage isn’t severe enough to be considered a total loss.
  • Another rule called section EZ 78 doesn’t apply to your property.

Normally, you might have to pay tax on some of the insurance money you get. This is called depreciation recovery income. However, this law limits how much of that income you have to report. You only need to report the smaller amount between:

  • The amount you would normally have to report as depreciation recovery income.
  • The total amount of depreciation deductions you’ve claimed for the property in the past.

This rule overrides another rule called section EE 52, which usually decides how much depreciation recovery income you report when you get compensation for damaged 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=DLM7219609.

Topics:
Money and consumer rights > Taxes
Housing and property > Home safety and repairs
Environment and resources > Climate and energy
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EZ 78: Insurance for Hurunui/Kaikōura earthquake damage of property: treatment as disposal and reacquisition, or

“Insurance pay-outs for Hurunui/Kaikōura earthquake damage treated as property sale and repurchase”

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Part E Timing and quantifying rules
Terminating provisions: Entry to new life insurance regime: transitional and miscellaneous provisions

EZ 79Insurance for Hurunui/Kaikōura earthquake damage of property: limit on depreciation recovery income

  1. This section applies for a person and an item of depreciable property when—

  2. the item is damaged by a Hurunui/Kaikōura earthquake as that term is defined in section 4 of the Hurunui/Kaikōura Earthquakes Recovery Act 2016; and
    1. the person is entitled to an amount of insurance or compensation for the damage to the item; and
      1. the damage does not meet the requirements of section EE 47(4) (Events for purposes of section EE 44); and
        1. section EZ 78 does not apply for the item.

          1. If the person would derive depreciation recovery income under section EE 52 (Amount of depreciation recovery income when compensation received) in an income year for the item in the absence of this section, the person derives in the income year an amount of depreciation recovery income equal to the lesser of—

          2. the amount of depreciation recovery income under section EE 52 that the person would derive in the income year for the item in the absence of this section:
            1. the total of the amounts of depreciation loss for which the person has been allowed deductions for the item.

              1. This section overrides section EE 52.

              Notes
              • Section EZ 79: inserted, on (applying for the 2015–16 and later income years), by section 93(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).