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Income Tax Act 2007

Recharacterisation of certain transactions - Tax relief for emergencies - Certain optional timing rules for depreciable property

FP 18: Insurance for repairs of emergency event damage: optional timing rule for income, deductions

You could also call this:

“Special rules for telling the government about money to fix damage from emergencies”

When you have something that can lose value over time, like a building, and it gets damaged in an emergency, you might get some money to fix it. This money is called compensation. You can choose to follow some special rules about when you tell the government about this money.

If you get the compensation, or can estimate how much you will get, before the emergency is over, you tell the government about it in the first year you spend money to fix the damage or the last year of the emergency. You do this when you know how much the repairs will cost and how much compensation you will get.

If you spend money to fix the damage before the emergency is over, you tell the government about this cost in the first year you spend the money or the last year of the emergency. You do this when you know how much the repairs will cost and how much compensation you will get.

These rules are special and override other rules, like sections CG 4, EE 22, and EE 52, that talk about when you tell the government about money you get from insurance or compensation. They help you figure out when to tell the government about the compensation you get and the cost of fixing the damage.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS1432209.

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Part F Recharacterisation of certain transactions
Tax relief for emergencies: Certain optional timing rules for depreciable property

FP 18Insurance for repairs of emergency event damage: optional timing rule for income, deductions

  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 damage—
      1. does not result in the item being affected by a disposal and reacquisition under section FP 14; and
        1. does not meet the requirements of section EE 47(4) (Events for purposes of section EE 44); and
        2. the person is entitled to an amount of compensation for the damage to the item; and
          1. the person chooses to apply this section for all items of depreciable property to which paragraphs (a) to (c) apply.

            1. When the amount of compensation for the damage is derived or able to be reasonably estimated before the end of the emergency event period, the person’s income from the compensation is attributed to the earlier of—

            2. the first income year in which—
              1. the amount of expenditure for total repair of the damage (the repair cost) is, or has been, incurred or able to be reasonably estimated; and
                1. the amount of compensation is, or has been, derived or able to be reasonably estimated; and
                2. the final income year in the emergency event period.

                  1. If the repair cost is incurred or able to be reasonably estimated before the end of the emergency event period, the person’s deduction for that cost is attributed to the earlier of—

                  2. the first income year in which—
                    1. the cost is, or has been, incurred or able to be reasonably estimated; and
                      1. the amount of compensation is, or has been, derived or able to be reasonably estimated; and
                      2. the final income year in the emergency event period.

                        1. This section overrides sections CG 4, EE 22, and EE 52 (which provide for receipts of insurance or indemnity payments) in relation to the timing of the person’s—

                        2. income from the compensation:
                          1. deduction for the repair cost.

                            Notes
                            • Section FP 18: inserted, on , by section 65 of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).