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Income Tax Act 2007

Recharacterisation of certain transactions - Tax relief for emergencies - Replacements: improvements to land

FP 12: Replacement property for improvements to land affected by emergency events

You could also call this:

“Delaying tax on money for fixing damage to your land after an emergency”

If you get money for damage to something on your land because of an emergency, you might have to pay tax on it. You can delay paying tax on this money if you plan to use it to fix or replace what was damaged. You must tell the Commissioner that you want to delay paying tax on this money, following the rules in section 226H of the Tax Administration Act 1994.

If you do not fix or replace what was damaged, or if you go bankrupt, you will have to pay tax on the money you got for the damage. The amount of tax you pay will depend on how much money you got for the damage and how much it costs to fix or replace what was damaged. You can find more information about how this works in section CG 4, section DO 4, section DO 5, section DO 11, and section CC 2C.

If you use the money to fix or replace what was damaged, the value of the new thing will be used to work out your tax. This means you might not have to pay as much tax, depending on how much the new thing costs. This rule overrides section CG 4, which is another rule about tax and damage to things on your land.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS1432192.

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Part F Recharacterisation of certain transactions
Tax relief for emergencies: Replacements: improvements to land

FP 12Replacement property for improvements to land affected by emergency events

  1. This section applies for a person and a current year when the person—

  2. receives an amount of compensation in or before the current year for an affected improvement to land; and
    1. would have, in the absence of this section, in or before the current year, a total amount of income under section CG 4 (Receipts for expenditure or loss from insurance, indemnity, or otherwise) from the compensation for the affected improvement to land; and
      1. has had deductions for the affected improvement to land under 1 or more of section DO 4, DO 5, or DO 11 (which relate to improvements to land); and
        1. plans in the current year to acquire replacement property; and
          1. notifies the Commissioner of their decision to suspend recognition of their suspended recovery income for the affected improvement to land in accordance with section 226H of the Tax Administration Act 1994.

            1. The person has an amount of income under section CC 2C (Compensation for improvements to land affected by emergency events) for the amount of the suspended recovery income for the affected improvement to land for the current year when—

            2. the current year ends, if the current year is the final income year of the emergency event period and the person has not acquired replacement property:
              1. in the current year, the person decides not to replace the affected improvement to land:
                1. in the current year, the person goes into liquidation or becomes bankrupt.

                  1. The amount of suspended recovery income a person has for their affected improvement to land is the amount of compensation received for that affected improvement to land that would have been income under section CG 4 in the absence of this section.

                  2. If the person acquires replacement property in the current year and the compensation received for the affected improvement to land exceeds the replacement cost, the person has an amount of income under section CC 2C for the amount, if any, by which the original cost for the affected improvement to land exceeds the replacement cost.

                  3. If the person acquires replacement property, the value attributed to the replacement cost of the affected improvement to land for the purposes of section DO 4, DO 5, or DO 11, as applicable, is,—

                  4. if the suspended recovery income is equal to or greater than the replacement cost, zero:
                    1. if the suspended recovery income is less than the replacement cost, the amount by which the replacement cost exceeds the suspended recovery income.

                      1. This section overrides section CG 4.

                      Notes
                      • Section FP 12: inserted, on , by section 65 of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).