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Income Tax Act 2007

Recharacterisation of certain transactions - Tax relief for emergencies - Replacements: revenue account property

FP 6: Meaning of suspended recovery income for affected revenue property

You could also call this:

“What suspended recovery income means for property that's been affected and gets compensation.”

When you have affected revenue property, you might get some compensation for it. The amount of suspended recovery income you have is the difference between the compensation you receive and the cost deductions for that property.

If you replace your affected revenue property, the amount of suspended recovery income will be reduced by a replacement cost adjustment.

This adjustment is calculated using a formula that takes into account the replacement cost of the new property, the cost deductions for the old property, and the compensation you received, as defined in section FP 3.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS1432177.

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Part F Recharacterisation of certain transactions
Tax relief for emergencies: Replacements: revenue account property

FP 6Meaning of suspended recovery income for affected revenue property

  1. Subject to subsection (2), the amount of suspended recovery income a person has for their affected revenue property is the amount by which the compensation received by the person exceeds their cost deductions for that property.

  2. When a person replaces their affected revenue property, the amount of their suspended recovery income under subsection (1) is reduced by the amount of the replacement cost adjustment calculated under subsection (3) or (5), as applicable.

  3. If the compensation received by the person for the affected revenue property exceeds the replacement cost of the replacement property and is equal to or exceeds the amount calculated under this subsection, the replacement cost adjustment is the amount calculated under the following formula:

    (replacement cost ÷ cost deductions) × (compensation − replacement cost).

    Where:

    • In the formula in subsection (3),—

    • replacement cost is the replacement cost, as defined in section FP 3, of the replacement property:
      1. cost deductions is the cost deductions, as defined in section FP 3, of the affected revenue property:
        1. compensation is the compensation, as defined in section FP 3, received for the affected revenue property.

          1. If the compensation received by the person for the affected revenue property is less than or equal to the replacement cost or the compensation is less than the amount calculated under subsection (3), the replacement cost adjustment is the amount of the suspended recovery income under subsection (1).

          Notes
          • Section FP 6: inserted, on , by section 65 of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).