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Income Tax Act 2007

Income - Terminating provisions

CZ 25D: Improvements to farmland and horticultural plants affected by North Island flooding events and replaced—insurance or compensation

You could also call this:

“Money from insurance for flooded farmland or plants is not income if you replace them.”

If you get money from insurance or compensation for damage to your farmland or horticultural plants because of North Island flooding, this money is not usually considered income. You must have received this money before the 2028-29 income year and you must have claimed deductions for the damaged property under sections like section DO 4 or DO 5. You also need to plan to replace the damaged property with new property that meets certain requirements, such as being an improvement to farm land as described in schedule 20, and you must notify the Commissioner about this.

If you spend money to replace the damaged property and the insurance money is more than what you spent, the extra money is considered income. However, if the insurance money is more than what the original property was worth, the amount of income is reduced. When you replace the damaged property, the value of the new property is determined based on the insurance money and the cost of the new property, as outlined in sections like section DO 4 or DO 5.

You must notify the Commissioner by a certain date, which is usually when you file your tax return, and you must provide details about the damaged property, the new property, and the cost of the new property. The Commissioner can allow you to file the notice later if there are exceptional circumstances. This rule overrides section CG 4, which is about receipts from insurance or compensation.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS952306.

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"Tax relief for flood-damaged property replaced with insurance money"

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Part C Income
Terminating provisions

CZ 25DImprovements to farmland and horticultural plants affected by North Island flooding events and replaced—insurance or compensation

  1. This section applies for a person and an income year (the current year) before the 2028–29 income year when the person,—

  2. in or before the current year, receives an amount of insurance or compensation for improvements to land subject to section DO 4 or DO 5 (which relate to improvements to land) (the affected property) that was damaged or destroyed by a North Island flooding event; and
    1. in the absence of this section, would have, in or before the current year, a total amount of income (the insurance income) under section CG 4 (Receipts for expenditure or loss from insurance, indemnity, or otherwise) from the compensation or insurance for the affected property; and
      1. has claimed deductions for the affected property 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 property (the replacement property)—
          1. replacing the affected property; and
            1. meeting the requirements of subsection (5); and
            2. notifies the Commissioner under subsection (7) in relation to the affected property.

              1. The amount of the insurance or compensation is not income unless subsection (3) or (6) applies.

              2. Where the person incurs expenditure (the replacement cost) in the current year to acquire replacement property and the amount of the insurance or compensation exceeds the replacement cost,—

              3. the amount of the insurance or compensation is income in the current year to the extent to which it exceeds the replacement cost; but
                1. the amount of that income is reduced to the extent to which the amount of the insurance or compensation is also greater than the original cost of the affected property.

                  1. If the person acquires replacement property, the value attributed to the expenditure to acquire the replacement property for the purposes of section DO 4 or DO 5, as applicable, is,—

                  2. if the insurance income is equal to or greater than the replacement cost, zero:
                    1. if the insurance income is less than the replacement cost, the extent to which the replacement cost exceeds the insurance income.

                      1. For an item of affected property, replacement property must be an improvement to farm land as described in schedule 20, part A (Expenditure on farming, horticultural, aquacultural, and forestry improvements) or a listed horticultural plant—

                      2. acquired in or before the person’s 2027–28 income year; and
                        1. located in New Zealand.

                          1. The person has an amount of income for the affected property in the current year equal to the insurance income when—

                          2. the current year ends, if the current year is the 2027–28 income year:
                            1. in the current year, the person decides not to replace the affected property:
                              1. in the current year, the person goes into liquidation or becomes bankrupt.

                                1. A person choosing to rely on this section to suspend in a current year the recognition of income from the insurance for affected property must notify the Commissioner—

                                2. by the later of 30 April 2024 and the date on which the return of income is filed for the earliest income year (the estimate year) in which the amount of the insurance for the affected property can be reasonably estimated; and
                                  1. if the current year is after the estimate year,—
                                    1. for each income year between the estimate year and the current year, by the date on which the return of income is filed for that income year; and
                                      1. for the current year, by the date on which the return of income is filed for the current year.

                                      2. The Commissioner may allow the person to file the notice under subsection (7) at a later time if the Commissioner considers there are exceptional circumstances.

                                      3. A notice under subsection (7) must—

                                      4. describe the affected property; and
                                        1. give details of replacement property acquired in the current year to replace, in full or in part, the affected property; and
                                          1. give the cost of the replacement property and the value attributed to that cost under subsection (4) for the purposes of section DO 4 or DO 5, as applicable; and
                                            1. give the amount, for the affected property, of the income from insurance or compensation remaining suspended under subsection (2) at the end of the current year.

                                              1. This section overrides section CG 4.

                                              Notes
                                              • Section CZ 25D: inserted (with effect on 1 April 2022), on , by section 29(1) (and see section 29(2) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                                              • Section CZ 25D(1)(d)(ii): amended (with effect on 1 April 2022), on , by section 35 of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).