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Income Tax Act 2007

Recharacterisation of certain transactions - Tax relief for emergencies

FP 3: Definitions for the purposes of subpart FP

You could also call this:

“What special tax words mean”

When you are reading about tax, you might see some words that are not easy to understand. You need to know what these words mean to understand the tax rules. The words are defined in a special part of the tax law.

You might see the word “affected class” which means a group of things you own that can lose value over time. This group can include buildings, things inside buildings, or other things that are not buildings. You can also have groups for things that are treated differently for tax.

The word “affected depreciable property” refers to things that lose value over time and are in one of these groups. These things must not be intangible, like a patent, and must be in a group that is affected by something. They can be damaged in an emergency, like an earthquake, which is described in section EE 47(4), or they can be replaced and you get something new for them, which is described in section FP 14.

There are also words like “affected depreciation loss” and “affected depreciation recovery income”. These words refer to the amount of money you lose or gain when something that loses value over time is damaged or replaced. You can find out more about this in section EE 48(2) and section EE 48(1).

Other words you might see are “affected improvement to land”, “affected property”, and “affected revenue property”. These words refer to things like buildings, land, or improvements to land that are damaged in an emergency. You can also see “compensation” which means money you get when something is damaged or lost. This can include insurance payouts or money from the government.

You might also see the words “cost deductions”, “current year”, and “emergency event period”. These words refer to the amount of money you can deduct from your tax for something, the year you are paying tax for, and the time period when an emergency happens. The emergency event period starts when the emergency happens and ends after a few years, or when the Governor-General says it ends, using section 6J of the Tax Administration Act 1994.

There are more words like “replacement cost” and “replacement property”. These words refer to the amount of money you spend to replace something that is damaged, and the new thing you get to replace the old one. The new thing must be similar to the old one and be in New Zealand.

Finally, you might see the word “suspended recovery income” which is defined in different parts of the tax law, like section FP 6, section FP 9, and section FP 12(3). This word refers to income that you do not have to pay tax on right now, because it is related to something that was damaged in an emergency.

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Part F Recharacterisation of certain transactions
Tax relief for emergencies

FP 3Definitions for the purposes of subpart FP

  1. In subpart FP, —

    affected class means 1 of the following classes of the person’s depreciable property that the affected depreciable property is included in:

    1. buildings:
      1. commercial fit-out not referred to in paragraph (c):
        1. commercial fit-out for which the person uses the pool method:
          1. depreciable property for which the person uses the pool method, other than commercial fit-out:
            1. depreciable property not referred to in paragraphs (a) to (d)

              affected depreciable property means depreciable property that—

              1. is not depreciable intangible property; and
                1. is included in an affected class; and
                  1. as a result of an emergency event, is affected by—
                    1. damage that meets the requirements of section EE 47(4) (Events for purposes of section EE 44); or
                      1. a disposal and reacquisition under section FP 14

                      affected depreciation loss means, for an affected class,—

                      1. the total amount of depreciation loss under section EE 48(2) (Effect of disposal or event), treated as a positive amount, that the person has for all items of affected depreciable property in the affected class for which the compensation received for the item is less than the adjusted tax value of that item; or
                        1. in any other case, zero

                          affected depreciation recovery income means, for an affected class, the total amount of depreciation recovery income the person would have, in the absence of this subpart, from the compensation received for each item of affected depreciable property in the affected class under section EE 48(1)

                            affected improvement to land means an improvement to land subject to section DO 4 or DO 5 (which relate to improvements to farmland and expenditure on horticultural plants) that has been damaged or destroyed in an emergency event

                              affected property means—

                              1. affected depreciable property:
                                1. affected improvements to land:
                                  1. affected revenue property

                                    affected revenue property means a person’s land or building that is—

                                    1. revenue account property under section CB 6, CB 7, CB 12, or CB 13 (which relate to income from certain disposals of land); and
                                      1. damaged by an emergency event; and
                                        1. useless for the purposes of deriving income as a result of that event; and
                                          1. if it is a building, required to be demolished or abandoned for later demolition due to the damage to the land, building, or the neighbourhood of the building

                                            compensation means—

                                            1. insurance or another amount in recognition of loss:
                                              1. for affected revenue property, an amount that a person derives from insurance, a government or local authority buy-out, or other amount in recognition of loss, or a combination of these, that would be income of the person under section CB 6, CB 7, CB 12, CB 13, or CG 6 (Receipts from insurance, indemnity, or compensation for trading stock) in the absence of this subpart

                                                cost deductions means, for affected revenue property, the total amount of a person’s deductions under section DB 23 (Cost of revenue account property) for that property

                                                  current year means an income year that falls within the emergency event period in relation to which a person may apply a provision in this subpart

                                                    emergency event period means the period—

                                                    1. beginning with the start of the income year in which the emergency event first occurs; and
                                                      1. ending with either—
                                                        1. the last day of the income year that is 5 income years after the income year referred to in paragraph (a); or
                                                          1. a later date specified by the Governor-General by Order in Council made under section 6J of the Tax Administration Act 1994

                                                          replacement cost means the amount of expenditure a person incurs to acquire replacement property

                                                            replacement property means property that replaces affected property and is,—

                                                            1. for affected revenue property, a building or land that is revenue account property located in New Zealand:
                                                              1. for affected depreciable property, property—
                                                                1. included in the same class, as described in the definition of affected class, as the affected depreciable property; and
                                                                  1. located in New Zealand:
                                                                  2. for an affected improvement to land, an improvement to farmland as described in schedule 20, part A (Expenditure on farming, horticultural, aquacultural, and forestry improvements) or a listed horticultural plant located in New Zealand

                                                                    suspended recovery income —

                                                                    1. is defined in section FP 6 for the purposes of affected revenue property:
                                                                      1. is defined in section FP 9 for the purposes of an affected class of depreciable property:
                                                                        1. is defined in section FP 12(3) for the purposes of affected improvements to land.

                                                                        Notes
                                                                        • Section FP 3: inserted, on , by section 65 of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).