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Income Tax Act 2007

Recharacterisation of certain transactions - Tax relief for emergencies - When certain items of depreciable property damaged

FP 15: Insurance for damage of property caused by emergency event: limit on depreciation recovery income

You could also call this:

“Limit on money back for damaged items after an emergency”

When you have an item that can be depreciated and it gets damaged in an emergency event, this section might apply to you. You must be getting compensation for the damage and you would normally get depreciation recovery income under section EE 52 for the item. The damage must not meet the requirements of section EE 47(4) and section FP 14 must not apply to the item.

You will get depreciation recovery income for the item, but it is limited to the smaller of two amounts. The first amount is what you would normally get under section EE 52 if this section did not exist. The second amount is the total depreciation loss you can claim as a deduction for the item.

This section is more important than section EE 52 if they disagree, and it overrides section EE 52 when you are working out your depreciation recovery income.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS1432201.

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"When it's not worth fixing damaged property after a disaster"

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FP 16: Item treated as available for use if access restricted due to emergency event, or

"Items you can't use due to an emergency are still counted as available for use."

Part F Recharacterisation of certain transactions
Tax relief for emergencies: When certain items of depreciable property damaged

FP 15Insurance for damage of property caused by emergency event: 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 an emergency event; and
    1. the person is entitled to an amount of compensation for the damage to the item; and
      1. the person would, in the absence of this section, derive depreciation recovery income under section EE 52 (Amount of depreciation recovery income when compensation received) in an income year for 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 FP 14 does not apply in relation to the item.

            1. The person derives an amount of depreciation recovery income in the income year that is equal to the lesser of—

            2. the amount of depreciation recovery income that the person would derive in the income year for the item under section EE 52 in the absence of this section; and
              1. the total amount of depreciation loss for which the person has a deduction for the item.

                1. This section overrides section EE 52.